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Airways owes Service Tax Department
July, 31st 2009

Jet Airways owes Rs 260 crore to the Service Tax Department. Mint's PR Sanjai reports that no service tax had been paid on import of services for the past three years. Jet has now been asked to pay Rs 247.47 crore as tax for FY06-FY08, with interest. Jet Airways officials confirmed that they have received a show-cause notice from Service Tax Department.

The Service Tax Department has conducted a five year audit on Jet Airways on various imports of services. This is first time such an audit was carried on Jet Airways. The audit has revealed that the airline owes at least Rs 260 crore to the Service Tax Department. According to this audit report the airline has not paid service tax on import of services for past three years. The audit report had said Jet Airways has wrongly availed Cenvat credit for three fiscal years between 2005 and 2007.

Initially Jet Airways legal consulting firm ELP & Solicitors had written to Service Tax Department with some clarification but the Service Tax Department did not agree to those clarifications. Now Jet Airways officials confirmed that they have received a show-cause notice from Service Tax Department. Jet clarified that this matter has been referred to lawyers and sort time till September 2009 to submit its response.

A Jet Spokesperson who spoke to Mint said, "Jet Airways has received a show cause notice from the service tax department demanding service tax on various foreign exchange related expenses, which is based on import of services rules. This matter has been referred to our lawyers and they are in the process of drafting an appropriate response. We have sought time till September 2009 to submit our response."

Jet also said that it is confident that a substantial portion of this demand would be set aside or not be applicable. A spokesperson said, "After due consultations and consideration of various case laws, we are confident that a substantial portion of this demand would be set aside (or not be applicable) and liabilities if at all any, would be very negligible." What is also interesting to note is that Jet said if at all there are any liabilities it would be very negligible.

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