2024-VIL-409-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Classification of taxable services - Demand of service tax supply of non-scheduled air transport services by owned/leased aircraft and on import of aircraft from non-resident entity on payment of Lease rental, under section 73(2) of Finance Act, 1994, classifying the same as ‘supply of tangible goods services’ – invoking of extended period of Limitation – HELD – on the first issue, the appellant has not argued the issue on merits but contest Show Cause Notice on the ground of limitation - the Department has initiated investigation against the appellant for the first time in June 2010, on the ground that the appellant should discharge its tax liability under the category of ‘supply of tangible goods for use services’. However, no Show Cause Notice was issued at that point of time. Investigation was initiated against the appellant again in the year 2012. After expiry of a period of three years from the initiation of first investigation in month of June 2010, the appellant has been served with the impugned SCN invoking extended period and alleging wilful evasion of Service Tax - the dispute in this case is related to classification of taxable services under appropriate category and it involves interpretation of the statutory provisions and suppression of fact with intention to evade payment of service tax cannot be alleged in this case - the appellant has been filing the returns regularly and they have not suppressed any information from the Department. Accordingly, the demand of service tax confirmed in the impugned order by invoking extended period of limitation is not sustainable - the appellant is liable to pay service tax along with interest for the normal period of limitation, under the category of 'supply of tangible goods service' – appeal is partly allowed - Demand of service tax under the category of 'supply of tangible goods service' on Lease rental paid to Non-resident entity – HELD - the operation of the aircrafts has been done by the appellant by appointing their own aircraft crew, maintenance staff, by undertaking maintenance and services activities. Thus, in terms of the conditions of lease rental agreement, both possession and control of aircraft has been transferred in favour of the appellant. Accordingly, the subject transaction is ‘deemed sale’ of goods which is outside the purview of service tax - As possession and effective control has been transferred to the appellant, the demand of service tax under the category of 'supply of tangible goods' is not sustainable – further, the subject aircraft has been assessed as ‘goods’ at the time of import, by the Customs authority, which is in line with the clarification issued by Tax Research Unit vide its letter bearing D.O.F No.334/1/2008-TRU dated 29-02-2008 - the demand confirmed in the impugned order on this count is not sustainable and set aside - As the demand of service tax is not sustainable, the demand of interest and penalty is also not sustainable
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