Custom, Excise & Service Tax Tribunal
Ssp Aviation Limited vs Principal Commissioner, Service ... on 25 July, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
Service Tax Appeal No. 50424 of 2017
(Arising out of Order-in-Original No. DLI-SVTAX-001-COM/020-16-17 dated 29.07.2016
passed by the Commissioner of Service Tax, Delhi-I)
M/s SSP Aviation Private Limited Appellant
4-17B, MGF House, Asaf Ali Road,
New Delhi-110002
VERSUS
Commissioner, Service Tax, Delhi-I Respondent
Appearance Shri A.K. Batra, Chartered Accountant, Shri Rakesh Chitkara, Advocate & Ms. Sakshi Khanna, Chartered Accountant - for the Appellant. Shri Harshvardhan, Authorized Representative - for the Respondent CORAM :
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) Date of Hearing/Decision : 25/07/2023 Final Order No. 50973/2023 Justice Dilip Gupta This appeal has been filed by M/s SSP Aviation Private Limited, New Delhi1 against the order dated 29.07.2016 passed by the Principal Commissioner of Service Tax, Delhi-i2.
2. The appellant is a private limited company. During the period of dispute from 01.04.2008 to 31.03.2012, the appellant was engaged in providing services relating to aviation industry and was 1 the appellant 2 the Principal Commissioner 2 ST/50424/2017 holding a permit issued by the Directors General of Civil Aviation3 to operate non-scheduled air transport service. As a non-scheduled aircraft operator, the appellant provided travel facility by air by way of providing its aircraft on charter basis. The appellant discharged service tax liability on the consideration charged by its clients for providing transportation of passengers by air services. The details of tax paid by the appellant during the disputed period is as follows:
Period Taxable Value Tax paid Tax paid in Total Tax through cash paid CENVAT Credit 2008-09 3,05,06,345 2,46,902 34,78,490 37,25,392 2009-10 2,06,77,432 0 21,29,776 21,29,776 2010-11 3,05,14,914/- 2,58,222 28,84,814 31,43,036 Total 8,16,98,691 5,05,124 84,93,080 89,98,204
3. The appellant during the period of dispute also incurred expenses for repairing aircrafts owned by it. The aircrafts were repaired by the foreign vendor at their own premises i.e. outside India and the appellant made payments to them in foreign currency. The payments made by the appellant comprises of repairing charges, ground handling charges and charges for obtaining permissions. The appellant claims that before an aircraft is sent abroad for repairs, the appellant is required to obtain permission from DGCA. In accordance with the permission accorded by the DGCA, the appellant sends the aircraft abroad and the repair activities are carried out by the foreign vendor. Once the aircraft is sent back to India, the appellant files a Bill of Entry and 3 DGCA 3 ST/50424/2017 pays Customs Duty on the value of parts replaced, as supported by the invoices of the foreign vendors. The aircraft is then inspected by the agencies approved by the DGCA to certify the same as fit for air operations. Based on such report, the DGCA certifies the aircraft as fit for air operations and then, the air operations are carried out.
4. The appellant claims that as it had availed various services while rendering the output services it availed CENVAT credit of service tax paid in respect of such services under the provisions of CENVAT Credit Rules, 2004. The department believed that the appellant had wrongly categorized the services of providing aircraft to its customers as "transport of passengers by air" instead of "supply of tangible goods for use" since the appellant had not transferred the effective control and possession of the aircraft. The department also believed that the payments made by the appellant to the foreign vendors in foreign currency were towards the repairing services availed by it, which would be taxable under „management, maintenance or repair‟ services and the appellant would be liable to pay service tax under the reverse charge mechanism. The department also believed that the appellant would not be entitled to avail the CENVAT credit as it had failed to provide the relevant documents for verification of admissibility of such credit.
5. Accordingly, a show cause notice dated 24.10.2013 was issued to the appellant proposing to levy service tax of Rs.2,65,72,712/- with interest. The appellant filed a detailed reply to show cause notice. The Principal Commissioner, by the 4 ST/50424/2017 impugned order, confirmed the demand of service tax amounting to Rs. 1,43,95,826/-.
6. The three issues raised before the Principal Commissioner are as follows:
(i) Wrong classification of services availed by the appellant as the services provided by the appellant would fall under SOTG as defined under section 65(105)(zzzzj) of the Finance Act, 1994 4 instead of transport of passengers by air as defined under section 65(105)(zzzo) of the Finance Act;
(ii) Non-payment of service tax under the reverse charge mechanism on payments made to foreign vendors for repair works aircraft outside India;
(iii) Denial of CENVAT credit of Rs. 33,96,323/- as the appellant had not submitted the relevant documents relating to credit availed by it.
7. A summary of the demand confirmed by the Principal Commissioner is as follows:
Particulars Issue I (in Issue II Issue III Total Rs.) (in Rs.) (in Rs.) (in Rs.) Demand proposed as 1,11,83,803 41,34,017 1,12,54,892 2,65,72,212 per show cause notice Less: demand dropped - - 78,58,569 78,58,569 in respect of CENVAT Credit Less: Cum-Tax benefit 11,17,882 - - 11,17,882 allowed Less: ST paid by 26,07,435/- 5,93,052/- - 32,00,487 appellant; appropriated by the Department Balance Demand in 74,58,486 35,40,965 33,96,323 1,43,95,774 Dispute 4 the Finance Act 5 ST/50424/2017
8. The three issues are dealt with separately:
Issue No. I
9. Shri A.K. Batra, learned counsel appearing for the appellant has very fairly stated that the Principal Commissioner correctly classified the services under SOTG, but what he contends is that service tax could not have been confirmed for the period 1.04.2008 to 15.05.2008 as the said service became taxable only with effect from 16.05.2008. Learned counsel also contended that the appellant had paid service tax on the consideration received from the client under the category of transport of passengers by air services and so this amount should be appropriated.
10. All that has, therefore, to be seen is whether SOTG service became leviable to service tax with effect from 16.05.2008 and whether the appellant had made any payment of service tax under the head "transport of passengers by air services".
11. It is not in dispute that SOTG service became leviable to service tax only with effect from 16.05.2008. The service tax, therefore, for the period from 01.04.2008 to 15.05.2008 deserves to be set aside.
12. Though the appellant has asserted that service tax was paid under category of transport of passenger by air services, but this fact needs to be verified.
Issue No. II
13. This issue relates to non payment of service tax under the reverse charge mechanism on payments made by the appellant to foreign vendors for repairing of aircrafts. This demand is to the 6 ST/50424/2017 extent of Rs. 41,34,017/-, but as an amount of Rs. 5,93,052/- has been appropriated by the department, the balance demand is to the extent of Rs. 35,40,965/- only.
14. It is the contention of the learned counsel for the appellant that the Principal Commissioner failed to consider the provisions of "Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 5 and if rule 3(ii) of the said Rules had been examined, demand could not have been confirmed under the reverse charge mechanism.
15. It is true that the Principal Commissioner has not examined the provisions of the 2006 Rules.
16. Rule 3(ii) provides that subject to Section 66A of the Finance Act, the taxable services provided from outside India and received in India, shall, in relation to the taxable service specified in sub- clause (zzg) of section 65 (105) of the Finance Act be such services as are performed in India.
17. The contention of the learned counsel for the appellant is that it is an admitted fact that the services were provided from outside India and, therefore, would not be leviable to service tax.
18. This submission deserves to be accepted. It is only in a case where such services are performed in India that they would be leviable to service tax. In the present case, it is not in dispute that the services were provided outside India. Service tax, therefore, could not have been demanded from the appellant under the reverse charge mechanism.
5 2006 Rules 7 ST/50424/2017 Issue No. III
19. The third issue that arises for consideration is as to whether the Principal Commissioner was justified in denying the CENVAT credit of Rs. 33,96,323/- for the reason that the appellant had not produced the relevant documents.
20. The contention of the learned counsel for the appellant is that after the hearing was concluded on 18.01.2016, the appellant had sent a letter dated 24.05.2016 which was received by the department on 26.05.2016 stating therein that it was ready and willing to produce original records to the officials deputed by the Principal Commissioner, at a day‟s notice, but such an opportunity was not provided by the Principal Commissioner to the appellant.
21. The aforesaid letter dated 24.05.2016 sent by the appellant to the Principal Commissioner is reproduced below:
"Respected Madam, We had appeared for personal hearing before Your Honour on 18.01.2016 and made detailed oral, as well as, written submissions running into 464 pages. To recall your query on Para 44 to the subject SCN wherein entire CENVAT credit for all the 5 years has been denied on the pretext that the Noticee failed to produce corroborative/supporting documents (Attached as Annexure-I), we had drawn your attention to all the letters during investigations where no such information was ever sought but allegation was strangely included in the SCN.
We drew your kind attention to item No. 19 (pages 372-464) of the written reply handed over to your personally then whereunder "Credit registers for the relevant period along with the invoices, on sample basis, on the basis of which credit has been availed"
were incorporated.
We also offered to produce the entire record, in original, for your verification, to which you assured that we shall soon be intimated when and to whom these be produced.
Now more than 3 months have elapsed since the personal hearing. Neither any Adjudication Order nor any directions from your office in regard to CENVAT verification, has been received.
8
ST/50424/2017 We have been ready and willing to produce such original records to the officials deputed by you at a day‟s notice.
We humbly plead that no Adjudication Order be passed now on account of „undue delay‟ and without affording us an opportunity of a fresh personal hearing after conducting such verification."
22. A perusal of the aforesaid letter does indicate that during the course of hearing the appellant had offered to produce the entire original record for verification and the Principal Commissioner had assured the appellant that a date for this purpose would be intimated to the appellant. However, as the date was not intimated, the appellant had offered to produce the documents.
23. The only reason on account of which CENVAT credit to the extent of Rs. 33,96,323/- was denied to the appellant is that the original records were not produced.
24. In the facts and circumstances of the case and in the interest of justice, it would be appropriate if an opportunity is now provided to the appellant to produce the relevant documents, particularly when before the order was delivered on 29.07.2016 and after the hearing was concluded on 18.01.2016, the appellant had offered to produce all the original documents.
25. The Principal Commissioner has stated in paragraph 7.5 of the impugned order that the appellant had not produced all the invoices of all the service providers. It is, therefore, appropriate that the matter is remanded to the adjudicating authority to permit the appellant to produce the records so that a fresh order on this aspect can be passed after examination of the documents. 9
ST/50424/2017 CONCLUSION
26. In view of the aforesaid discussion, the demand of service tax under issue No. II is set aside. As regards, issue No. I, the demand for the period from 1.04.2008 to 15.05.2008 is set aside. However, the adjudicating authority shall examine whether the appellant had paid service tax under the category of transport of passengers by air services and in case such tax had been paid, to appropriate the same. Regarding Issue No. III, the adjudicating authority shall provide an opportunity to the appellant to produce the relevant documents in connection with the services mentioned in paragraph 7.5 of the impugned order and to pass an appropriate order on the basis of the documents. The levy of penalty and interest shall accordingly, be modified by the adjudicating authority.
27. The impugned order dated 29.07.2016 passed by the Principal Commissioner is accordingly, set aside to the extent indicated above and the matter is remanded to the adjudicating authority to pass a fresh order in the light of the observations made above. The appeal is allowed to this extent.
(Dictated & pronounced in open Court) (Justice Dilip Gupta) President (Hemambika R. Priya) Member (Technical) RM