Service tax is not leviable under reverse charge mechanism for use of CRS/GDS

Recently, the Delhi CESTAT in the case of M/s Continental Airlines Inc. v Commissioner of Service tax, New Delhi 2015-TIOL-1481-CESTAT-DEL, has held that Service tax shall not liable in respect of the payments made to CRS/GDS under reverse charge mechanism and airport taxes collected by the Appellant from the airports.

The Appellant is engaged in providing services of transport of passengers by air embarking in India on international journey in all the classes, other than economy class. It was alleged by the Adjudicating Authority that the Appellant is liable to pay Service tax taxes in respect of payment made to CRS/GDS under reverse charge mechanism, airport taxes collected and in respect of pre-ponement and post-ponement charges collected. The Hon’ble CESTAT has dealt with the issues which has been tabulated as under:

Allegations made by the Adjudicating Authority	Decision held by Hon’ble CESTAT
Payment made to CRS/GDS under Reverse Charge Mechanism	The Appellant is not liable to Service tax under reverse charge mechanism as no amount has been paid by the Appellant and all the amounts were paid by the parent company of the Appellant in USA.
Airport taxes collected	Airport taxes were merely collected by the Appellant on the behalf of Airport Authority, hence shall not be included in assessable value.
Charges for pre-ponement and post-ponement of journey dates	Amount collected by way of pre-ponement and postponement charges are liable to Service tax since they are in direct relation to providing transport of passengers by air service.

Further, the demand in respect of pre-ponement and post-ponement charges is an interpretational issue and therefore the extended period of limitation is not invokable and also the penalty under Section 78 was dropped as there was no positive act of wilful misstatement/suppression.

Copy of the judgment passed by the Hon’ble Delhi CESTAT download from here