SRILANKAN AIRLINES LTD. Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) THE impugned order demands service tax and education cess totalling to over Rs. 1.8 crores from the appellants for the period 15.3.2005 to 23.6.2005 in respect of the taxable service of "transport of cargo by air". It also imposes an equal amount of penalty on the appellants. The present application seeks waiver of predeposit and stay of recovery in respect of the amounts demanded by the Commissioner.

(2.) AFTER examining the rec s and hearing both sides, we note that the above service was exempted from payment of service tax under Notification No. 28/2004 -ST dated 17.9.2004 and that this exemption was withdrawn under Notification No. 10/2005 -ST dated 3.3.2005 w.e.f. 15.3.2005. This exemption was restored under Notification No. 29/2005 -ST dated 15.7.2005. In between, the Export of Service Rules, 2005 came into force on 15.3.2005 under Notification No. 9/2005 -ST dated 3.3.2005. This Notification also exempted export of the above service from payment of service tax. Apparently, it was on the strength of this exemption that the appellants continued to render the above taxable service without payment of tax thereon. Notification No. 28/2005 -ST dated 7.6.2005 amended Sub -rule (2) of Rule 3 of the above Rules by providing that the payment for the taxable service specified under the rule should be received by the service -provider in convertible foreign exchange. The appellants were receiving payments for the above service in Indian currency throughout the entire period. The above amendment came into force on 16.6.2005. It appears, the appellants, after realizing the fact that the payments received by them in Indian currency from the recipients of the above service were chargeable to service tax w.e.f. 16.6.2005, started paying service tax from 24.6.2005. In the result, there was no payment of service tax by them from 15.3.2005 to 23.6.2005. The impugned demand is for this period.

(3.) WE have considered a similar matter and directed predeposit of an amount equivalent to service tax leviable for the period from 16.6.2005 to 23.6.2005 in the case of M/s. Malaysia Airlines vide Stay Order No. 798/07 dated 2.8.2007. In answer to a query from the Bench, ld. counsel has fairly submitted that the amount of service tax for the period 16.6.2005 to 23.6.2005 in the present case approximates to Rs. 20 lakhs.