AIR INDIA LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appeal and stay application are directed against Order -in -Original No. 6/PKA/COMMR/2012, dated 22 -2 -2012 passed by the Commissioner of Central Excise, Thane -II. The appellant M/s. Air India Ltd. entered into an Memorandum of Understanding (MOU) with its subsidiary M/s. Air India Charters Ltd. (AICL) with effect from 1 -4 -2005 and operational from 1 -3 -2008. As per the said MOU, M/s. AICL was permitted to operate low cost carrier flights to Gulf Sector by using Air India's International Traffic Rights to Gulf countries and AICL was also permitted to use Air India's brand name "AI" to carry out low cost carrier operations. Further, Air India was also to provide domain knowledge to AICL. In consideration thereof, AICL agreed to pay royalty of 25% of the revenue collected by low cost carriers to Air India. The department was of the view that the services rendered by Air India to AICL would come within the category of Intellectual Property Rights Services and accordingly issued a notice dated 1 -6 -2009 demanding the Service Tax of Rs. 29,74,75,042/ - along with interest thereon and proposing to impose penalties. Though the appellant contested the levy of Service Tax, the demand was confirmed along with interest and by imposing equivalent amount of penalty apart from penalties under Sections 76 and 77 of the Finance Act, 1994. Aggrieved by the said order, the appellant is before us.

(2.) THE ld. Counsel for the appellant submits that the Board of Directors of Air India as also AICL in the meeting held on 16 -3 -2008 decided to modify the MOU dated 24 -3 -2006 as per which the revenue earned by the AICL is shared between Air India and AICL in the ratio of 25:75 respectively, retrospectively from 1 -4 -2005 in return for the forbearance on the part of Air India on not operating on certain routes hitherto being operated by Air India. In other words, the royalty payments were made for the purpose of international traffic rights of certain routes and not for usage of Air India brand name or supply of domain knowledge. Similar resolution was passed by the Board of Directors of AICL also and this has been done after obtaining the legal advice. It is accordingly submitted that charges against the appellant that the royalty payment received by them is for using their brand name loss significance and accordingly, he pleads that the demand is not sustainable. However he fairly submits that the resolutions of Board meeting were not produced before the adjudicating authority at the relevant time.

(3.) WE have carefully considered the submissions made by both the sides.