Whether the applicant is required to include the airport tax and the passenger service fees in the assessable value of the services being provided by them?

PJ/Case Law/2019-2020/3607

Austrian Airlines Versus Commissioner of Service Tax, New DelhiFinal Order No. 53375/2018, Dated 28-11-2018
Brief Facts:-The Applicant is an airline registered with the service tax department under category of transport of passengers by air service.Demand of service tax demand of Rs. 1,13,86,734/- has been confirmed on the Passenger Service Fee (PSF) and the airport taxes collected by the applicant.
It has been contended by the department that the appellant are collecting fares from the passengers under 5 heads namely:- basic fare, fuel surcharge, insurance surcharge, (PSF) and airport taxes, however, the service tax has been discharged by the appellant only on the three heads namely basic fare, fuel surcharges and insurance surcharge and service tax has not been discharged on the amount of PSF and airport taxes collected by the appellant from its passengers.
Issue: -Whether the applicant is required to include the airport tax and the passenger service fees in the assessable value of the services being provided by them?
Contention of the Applicant: -The contention of the appellant is that all airlines are mandatorily required to collect PSF and airport taxes from the passengers and transfer the same to respective airport authorities. Since, the appellant are working as pure agents with regard to collection of PSF and airport taxes, we are collecting the same from the passengers and depositing the same with the concerned airport authorities. Hence, such charges cannot be included in the taxable value of the service provided by them as per the provision of Section 67 of the finance act 1994.
Reasoning of the Judgement:-Reliance was placed on rule 6 of the Service Tax Rules 2006 where it was observed that the said tax has been collected by the appellant and same has been shown separately on the tickets. Therefore, the appellant has complied with the condition of Rule 6 of Service Tax (Determination of Value) Rules, 2006 and the same are not includible in the assessable value of service provided by the appellant, as the impugned period is, post 27-2-2010 and the said issue has been examined by this Tribunal in the appellant's own case wherein this Tribunal has made it clear that these charges are not to be included in the assessable value of the services relying on the decision in the case of Continental Airlines v. CST, New Delhi. Moreover, as per the exemption Notification No. 12/2010, dated 12-2-2010, statutory taxes charged by any Government on Air passengers would be excluded from the taxable value for the purpose of levy of tax and therefore, the service tax is not payable by the appellant.
Held: -The Tribunal has held that the Passenger Service Fee (PSF) and Airport Tax collected by appellant from its passengers ,Airport tax collected as per Section 22 of Airports Authority of India Act, 1994 and PSF has been charged in terms of Aircraft Rules, 1937 ,Tax collected by appellant shown separately on the tickets ,Thus appellant complied with the condition of Rule 6 of Service Tax (Determination of Value) Rules, 2006 and same are not includible in the assessable value of services provided by appellant and the appeal was allowed.

Prepared By CA Kartik Singhvi

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PJ/Case Law/2019-2020/3607

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