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M/S AIR INDIA LTD Vs. COMMISSIONER ADJUDICATION, SERVICE TAX
May, 23rd 2013
       THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Judgment delivered on: 03.05.2013


+      CEAC 27/2013 & CM No. 7071/2013 (stay)

M/S AIR INDIA LTD                                               ... Appellant

                                        versus

COMMISSIONER ADJUDICATION, SERVICE TAX... Respondent

Advocates who appeared in this case:
For the Appellant            : Mr P.K. Sahu, Adv. with Mr Prashant Shukla, Adv.
For the Respondent           : Mr Satish Kumar, Adv.


CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE VIBHU BAKHRU

                                  JUDGMENT

BADAR DURREZ AHMED, J (ORAL)


1.     This appeal is directed against the order dated 05.03.2013 passed
by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in
Service Tax Stay No. 513/2012 in ST Appeal No. 243/2012.                       The
Commissioner of Service Tax by virtue of the Order-in-Original dated
14.11.2012 had confirmed a service tax demand of `. 65,48,52,240/-
against the appellant in respect of the year 2006-07. The said service tax
demand had two components. The first component being in respect of
alleged repair and maintenance service to the extent of `. 49.95 crores






CEAC 27/2013                                                           Page 1 of 6
and the other component being in respect of alleged business auxiliary
service to the extent of `. 15.53 crores.

2.     Insofar as the component pertaining to the alleged repair and
maintenance service is concerned, the Tribunal was of the prima facie
view that the service tax demand of `. 49.95 crores on this component did
not appear to be sustainable. However, with regard to the service tax
demand of `. 15.53 crores, the Tribunal, prima facie, held that the
demand was on a strong footing. The Tribunal observed as under:-

       "7. As regards the service tax demand of `. 15.53 crores, this
       demand is in respect of payments made to General Sales
       Agents (GSAs) appointed by the appellant in various foreign
       territories for the services received by them. On perusal of
       the relevant clauses of the appellant's agreements with the
       GSAs as, reproduced in the impugned order, we are of the
       prima facie view that the services provided by the GSA to
       the appellant are covered by the definition of business
       auxiliary service as given in Section 65(19) of the Finance
       Act, 1994, as the GSAs appointed by the appellant not only
       represent the appellant abroad and provide various services
       on their behalf they also promote the sales of the services
       being provided by the appellant by undertaking various sales
       promotion activities. Since this service has been used by the
       appellant in India in relation to their business located in
       India, in terms of the provisions of Rule 3(1)(iii) of the
       Taxation of Services (provided from outside India and
       received in India) Rules, 2006, this service has to be treated
       as having been provided from outside India and received in
       India by the appellant and, therefore, in terms of the
       provisions of Rule 66 A of the Finance Act, 1994 read with
       Rule 21(d)(iv) of the Taxation Rules, 1994, the appellant as



CEAC 27/2013                                                     Page 2 of 6
        service recipient would be liable to pay service tax on the
        same. We are, therefore, of the prima facie view that the
        service tax demand of `. 15.53 crores is on strong footing.
        As regards question of limitation, since the same is a mixed
        question of fact and law, the same can be examined only at
        the time of final hearing."

3.      It is on this basis that the Tribunal, prima facie, held that out of the
total service tax demand of `. 65,48,52,240/-, the service demand of about
`.   15.53 crores appeared to be on strong footing. However, taking the
financial hardship of the appellant in consideration, the Tribunal directed
the appellant to make a pre-deposit of `. 8 crores within a period of 8
weeks from the date of the order.

4.      The learned counsel for the appellant submitted before us that pre-
deposit of the entire amount of tax demanded ought to have been waived
by the Tribunal inasmuch as the financial position of the appellant was
very precarious. The fact that the appellant was going through a financial
crisis has been recognised by the Tribunal itself in its orders dated
29.11.2011 and 12.10.2012, though those orders pertained to different
services and different periods. The order dated 29.11.11 was passed by
the Tribunal in ST/S431/2010/ in ST Appeal No. 265/2010 in the case of
National Aviation Co. of India v. CCE. In that order, in paragraph 8 it
was specifically mentioned as under:-

        "But considering the financial hardship faced by this
        company, wholly owned by the Government of India we
        waive the full dues arising from the impugned order for
        hearing of the Appeal. There shall be stay on collection of
        such amounts during the pendency of the appeal."



CEAC 27/2013                                                         Page 3 of 6
The order dated 12.10.2012 was passed by the Tribunal in ST/Stay
Application No. 291/2010 in ST/Appeal No. 187/2010-(DB) in the
case of Air India Limited v. CCE.. In that order also the Tribunal
recognised the fact that the appellant was undergoing financial
difficulties. This would be apparent from the paragraph 17 of the
said order which reads as under:-

       "17. Considering the fact that the appellant is a
       national carrier under the ownership of Government of
       India presently facing serious financial difficulties and
       in view of the overall appreciation of the issues
       involved as analyzed above we consider it proper to
       waive the requirement of pre-deposit of dues arising
       from the impugned order for admission of appeal. It is
       ordered accordingly. There shall be stay on collection
       of dues arising from the impugned order during the
       pendency of appeal."

5.     In the present case, the learned counsel for the appellant
submitted that even in respect of the demand of `. 15.53 crores, the
Tribunal ought to have taken a prima facie view in favour of the
appellant. The learned counsel referred to the provisions of section
66A of the Finance Act, 1994 and, in particular, to sub-sections (1)
and (2) thereof as also to Explanations 1 and 2 therein. According
to the learned counsel for the appellant, the purported "business
auxiliary service" which was allegedly rendered was, in any event,
entirely rendered and received outside India and therefore there
was no question of payment of service tax in India in respect



CEAC 27/2013                                                       Page 4 of 6
thereof. The learned counsel for the appellant also submitted that
the contract with the GSA (General Sales Agent) was also entered
into in Hongkong. Furthermore, the ultimate beneficiaries of the
services were customers located abroad. On the other hand, the
Tribunal has taken a prima facie view that the demand of Rs. 15.53
crores stands on a strong footing.

6.     We have also heard the learned counsel for the respondent
on this issue as well.




7.     After examining the issue at some length, we feel that the
provisions of section 66A would require interpretation and the
issue according to us is not so clear-cut and is debatable. In these
circumstances, and particularly in view of the fact that the financial
hardship of the appellant has already been recognised by the
Tribunal in other orders dated 29.11.2011 and 12.10.2012, which
we have referred to above, in our opinion, the entire amount of tax,
penalty and interest demanded ought to have been waived as a
condition for hearing the appeal. Consequently, we modify the
order of the Tribunal by directing that there shall be full waiver of
the requirement to pre-deposit the tax, penalty and interest. The
appeal of the appellant before the Tribunal shall be heard without
insisting on any pre-deposit. It is obvious that the respondent shall
also not press for recovery of the tax, penalty and interest amount
till the disposal of the appeal by the Tribunal.




CEAC 27/2013                                                      Page 5 of 6
8.     The appeal is allowed to the aforesaid extent. There shall be
no orders as to costs.



                                      BADAR DURREZ AHMED, J



                                             VIBHU BAKHRU, J

MAY 03, 2013
kb




CEAC 27/2013                                                    Page 6 of 6
 
 
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