CESTAT Quashes Service Tax, Interest And Penalty On Virgin Atlantic Airways On Passenger Service Fee, Airport Taxes

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax, interest, and penalty on Virgin Atlantic Airlines passenger service fees and airport taxes.

The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has remanded the matter to the Commissioner for verification of whether the appellant had collected any administrative charges during the relevant period and, if so, the taxability.

The appellant/assessee, M/s. Virgin Atlantic Airways Ltd., operates as an airline and is registered with the service tax department for providing “Transport of passengers embarking in India for international journeys by Air Service” and “Transport of goods by Air Service." Receiving intelligence that the appellant was not paying service tax on the gross value of the services provided under the category of “Transport of passengers embarking in India for international journey by Air Service," officers called for information from the appellant and investigated the matter, which culminated in the issue of the first SCN. The SCN was followed up by the two periodical SCNs. It was alleged in these SCNs that the appellant was paying service tax on the basic fare, fuel surcharge, and insurance surcharge but was not paying service tax on the PSF, admin fee, and airport taxes collected from the passengers, and the same was proposed to be recovered.

The appellant replied to the SCNs, contending that no service tax is levied on the PSF, admin fee, or airport taxes. However, the demands were confirmed as proposed in the SCNs.

The appellant contended that the entire demand for the service tax in the SCNs is based on the information provided by the appellant. The appellant never said that it was collecting any admin fee, and it was wrongly added by the Commissioner of the first SCN. It was collecting an admin fee, which is in the nature of pre-ponement, postponement, or cancellation charges, which is not correct.

The tribunal held that it was a fact to be verified by the Commissioner that the appellant was collecting an admin fee, and if no admin fee is collected by the appellant at all, the question of levying service tax on it does not arise.

“We set aside the impugned order insofar as the demand for service tax on PSF and airport taxes is concerned and remand the matter to the Commissioner to examine if the appellant has collected any admin fee at all, and if so, the purpose for which it is collected and if service tax can be levied as per the law prevalent during the period and the precedent decisions. Consequently, we set aside the interest and penalties in the impugned order,” the CESTAT said.

Counsel For Appellant: Nagesh Kumar Versus Harsh Vardhan

Counsel For Respondent:

Case Title: M/s Virgin Atlantic Airways Ltd. Versus Commissioner of Central Excise, Delhi II

Case No.: Service Tax Appeal No. 52454 Of 2015

Click Here To Read The Order