AIR INDIA LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellant company has been constituted in the year 2007 by merging Air India Ltd. (AIL) and Indian Airlines Ltd. (IAL). The present appeal before this Tribunal is in the matter of service tax demanded from Indian Airlines Ltd. (IAL) for the period July, 2003 to March, 2007. During that period IAL had a 100% subsidiary by name "Airline Allied Services Ltd." (AASL). The dispute is in the matter of activities carried out by IAL to enable AASL to provide services to passengers. IAL and AASL entered into a Memorandum of Understanding dated 29 -3 -1999 for managing the affairs of AASL. Three agreements namely (i) Aircraft Lease Agreement, (ii) Engineering and Maintenance Agreement and (iii) Ground Traffic, other Support Services and Handling Agreement were parts of such MOU. The preamble clauses regarding relationship and objectives of the main MOU read as under:

(2.) It was envisaged that AASL, though a separate company, would operate in complete synergy and co -operation with IAL. It was to make maximum use of the infrastructure and manpower of IAL, with a view to minimizing costs of operations of the two airlines.

(3.) REVENUE was the view that the activities carried out by IAL as per the above agreements involved services taxable under Finance Act, 1994 and based on such understanding a Show Cause Notice dated 24 -10 -2008 was issued. After adjudication a demand of Rs. 15,70,14,081/ - is confirmed against appellant along with interest and penalties. The amount confirmed is only in respect of the activities carried out under the third agreement mentioned earlier namely, "Ground Traffic, Other Support Services and Handling Agreement". The demand is confirmed under the head "Business Auxiliary Service" defined under Section 65(19) of Finance Act, 1994 in matters of activities like Sales and Marketing Net Work Support, Revenue Collection and Credit Administration Support, Billing and Accounting Support etc. There is also a ground that IAL was providing service to the customers for and on behalf of AASL. The tax demanded is relatable to commissions received under clause 4 and clause 14 of the Ground Traffic, other Support Services and Handling Agreement.