Service Tax can't be levied from Aircraft Engg Institutes: Delhi High Court
May, 22nd 2013
The Delhi High Court today held that Service Tax cannot be levied from Aircraft Engineering Institutes which award aircraft maintenance engineering licences.
A bench comprising Chief Justice D Murugesan and Justice Rajiv Sahai Endlaw also quashed show cause notices issued to M/s Indian Institute of Aircraft Engineering (IIAE) demanding Service Tax from the institute.
"We are therefore of the view that the instruction ... holding the petitioner (IIAE) to be assessable to Service Tax is contrary to Section 65(27) (of the the Finance Act) and the Notification dated 25th April, 2011. Accordingly, the said instruction and the show cause notices given to the petitioner are quashed," the court said.
IIAE had moved the court against the Service Tax demand notice issued on May 11, 2011 by the Central Board of Excise and Customs (CBEC).
The CBEC had said that flying training institutes and aircraft engineering institutes which provide commercial pilot licences and basic aircraft maintenance engineering licence (BAMEL) respectively fell under the category of coaching institutes as described under the Finance Act and hence, they are assessable for Service Tax.
CBEC had also said that commercial training or coaching services were brought under Service Tax net with effect from July 01, 2003.
However, IIAE took the plea that it cannot be made to pay Service Tax like other coaching institutes as it issues a certificate approved by the Directorate General of Civil Aviation (DGCA) to successful candidates.
Justice Endlaw, writing the judgement for the bench, said the licences given by IIAE to successful candidates are approved by the DGCA.
"The recognition accorded by the (Aircraft) Act, Rules and CAR supra to the Course Completion Certificate issued by the Institutes as the petitioner cannot be withered away or ignored merely because the same does not automatically allow the holder of such qualification to certify the repair, maintenance or airworthiness of an aircraft and for which authorisation a further examination to be conducted by the DGCA has to be passed/cleared," it said.
The training and the subsequent Course Completion Certificates awarded by such institutes to students are recognised by law and hence, the institute is exempted from Service Tax, the court said.
"Seen in that light, there can be no doubt whatsoever that the activities of the petitioner are very much regulated by the Act and the Rules aforesaid and the instructions/ regulations issued thereunder from time to time," it said.