Demand U/S 73A Of Finance Act Unsustainable Without Proof Of Service Tax Collection: CESTAT

Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) stated that “the invoice does not indicate any service tax collection by the assessee. The assessee had merely collected VAT and AAI levy from their clients, and no amount representing Service tax has been collected. Consequently, the demand under Section 73A cannot be sustained in respect of 5 of the Show Cause Notices issued to the assessee.”

The assessee/appellant is engaged in the business of airline catering which entails sale of food & beverages and provision of flight handling and hi-loader services to airlines companies.

The assessee pays Value Added Tax on the sale of goods (food & beverages) and Service Tax on the amount charged for provision of services.

The assessee entered into an agreement with Airport Authority of India and Delhi International Airport Private Limited whereby the lease granted to the assessee for its works at airport premises was extended and the rights of AAl thereunder have been assigned to DIAL.

The assessee was required to pay annual lease rental to DIAL along with the royalty calculated in the manner set out in the agreement. Both these amounts were part of the consideration payable by the assessee to DIAL for lease of premises at the airport.

The said amount was recovered by DIAL by raising invoices on the assessee, on which DIAL charged and paid appropriate Service Tax. Being cost incurred by the assessee in carrying out various transactions, the assessee recovered these charges from its customers.

A show cause notice was issued to the assessee wherein a demand under Section 73A of the Finance Act along with interest under Section 75 of the Act and penalties under Section 76, 77 and 78 of the Act were raised against the assessee.

The assessee submitted that the assessee has been discharging VAT on the AAI levy collected with respect to the transaction related to sale of food & beverages. Once VAT had been paid on a transaction, no service tax can be demanded as VAT and Service Tax are mutually exclusive tax.

The department argued that the AAl levy charged by DIAL was towards allowing of use of Airport infrastructure by DIAL to the assessee. Such services provided by DIAL during the relevant period, were leviable to service tax.

The department further contented that whatever Service Tax was leviable on the services provided by DIAL to the assessee, the assessee had collected the same along with Service Tax thereon, from their clients and paid the same to DIAL.

The bench after analysing Section 73A noted that the word “Collection” precedes “payment”. Thus, if no amount of service tax is collected, then section 73A is not applicable. Further, such amount should be in excess of service tax determined or assessed.

The Tribunal opined that Section 73A is categorical that the amount should have been collected as Service tax and not deposited. No such evidence has been brought forward by the Revenue to establish that the said amount representing service tax was collected by the assessee from the sale of Food and beverages.

The bench stated that the said demand has been raised on the transactions where VAT was paid by the assessee on sale of food and beverage. Consequently, on this ground as well the demand cannot be sustained.

In view of the above, the Tribunal allowed the appeal.

Case Title: Taj Sats Air Catering Limited v. Principal Commissioner of Central Goods, Service Tax and Central Excise, Delhi South

Case Number: Service Tax Appeal No. 51544 Of 2018

Counsel for Appellant/ Assessee: B. L. Narsimhan

Counsel for Respondent/ Department: Jaya Kumari

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