Delhi High Court
Business Aviation Association ... vs Union Of India & Anr. on 12 July, 2011
Author: Dipak Misra,Chief Justice
03
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 3292/2010
BUSINESS AVIATION ASSOCIATION FOR INDIA ..... Petitioner
Through Mr. Atul Sharma, Mr. Milanka
Chaudhury and Mr. Abhishek
Sharma, Advocates.
versus
UNION OF INDIA & ANR. ..... Respondent
Through Mr. Sushil Kumar Dubey,
Advocate for Ms. Sonia Mathur,
Advocate for R-1. Mr. Satish
Kumar, Advocate for R-2.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA
ORDER
% 12.07.2011
Heard Mr. Atul Sharma, learned counsel along with Mr. Milanka
Chaudhury and Mr. Abhishek Sharma, learned counsel for the petitioner,
Mr. Sushil Kumar Dubey, learned counsel for the respondent No.1 and
Mr. Satish Kumar, learned counsel for the respondent No.2.
2. Invoking the extraordinary jurisdiction of this Court under Article
226 of the Constitution of India, the petitioner has prayed for issue of a
writ of certiorari for quashment of the circular bearing Dy. No.20/Comm
(ST)/2009 dated 9th February, 2009 issued by the first respondent seeking
to impose Service Tax on chartering of aircrafts under Clause (zzzzj) of
sub-section 105 of Section 65 of the Finance Act, 1994 and further to
issue a direction to the second respondent restraining it from initiating any
proceedings to impose and collect Service Tax on chartering of aircrafts
under the said provision.
3. The factual matrix need not be stated in detail except stating that
the petitioner, namely, Business Aviation Association for India, a society
registered under the Societies Registration Act, 1860, consisting of
members engaged in the business of charter aircrafts i.e. members who
own and operate an aircraft in India as a means of transportation
commercially as a business activity.
4. On 9th February, 2009, a circular was issued by the Central Board
of Excise and Customs, Department of Revenue. The petitioner
association sought clarification in respect of the said circular. The
respondent No.2, without clarifying the queries made by the petitioner,
asked for information. The nature of information relates to chartering
contracts. Be it noted, in the said clarificatory letters, it is submitted by
Mr. Sharma, demands are being made.
5. It is submitted by Mr. Sharma that the circular transgresses the
language employed in clause (zzzzj) of sub Section 105 of Section 65 as
there is no transaction. Learned counsel would submit that activity is
covered under the said clause and, therefore, during the relevant period
exemption is to be granted except in case of international travel.
6. Mr. Satish Kumar, learned counsel for the respondent No.2 would
submit that the circular has been issued under clause (zzzzj) to ensure that
the service tax under the Act is not avoided and the language employed in
the circular clearly gives room for interpretation and the petitioner can
always raise the plea that it is not covered within the circular.
7. To appreciate the submissions, it is apposite to refer to the circular,
which is under challenge. It reads as follows:-
"Sub: Service Tax on chartering of Aircrafts.
It has been brought to the notice of the Board that
may non-scheduled operator engaged in the business
of giving the right to use the aircraft to its customers
(Chartering of aircrafts) are not paying service tax.
2. The issue has been examined in the Board. With
effect from 16.05.2008, service provided to any
person by any other person in relation to supply of
tangible of goods including machinery, equipment
and appliances for use, without transferring right of
possession and effective control of such machinery,
equipment and appliances is taxable service under
Section 65(105) (zzzj). Chartering of aircrafts by a
client only confers him with the right to use the
aircraft and the owner of the aircraft in such case
does not transfer right of possession. As to whether
effective control over the aircraft is transferred or not
would be a question of fact to be determined in each
case. Where the crew is also provided by the owners
of the aircrafts as in a wet lease of aircraft effective
control is not transferred.
3. You may examine the facts of each case of aircraft
leasing in your jurisdiction and take action to recover
tax wherever due. A list of the non-scheduled
operators (permit holders) is enclosed herewith. A
report in the present position of collection of service
tax paid in chartering of aircrafts and the further
action based on this reference may be sent to Director
General (Service Tax)."
8. Clause (zzzo) of Section 65 of the Act before it was amended w.e.f.
1st July, 2010 was as follows:-
"(zzzo) to any passenger, by an aircraft operator, in
relation to scheduled or non-scheduled air transport
of such passenger embarking in India for
international journey, in any class other than
economy class.
Explanation 1 : For the purposes of this sub-clause,
economy class in an aircraft meant for scheduled air
transport of passengers means,-
(i) Where there is more than one class of travel, the
class attracting the lowest standard fare; or
(ii) Where there is only one class of travel, that
class.
Explanation 2 : For the purposes of this sub-clause, in
an aircraft meant for non-scheduled air transport of
passengers, no class of travel shall be treated as
economy class"
9. Clause (zzzzj) of Section 65 reads as follows:-
"to any person, by any other person in relation to
supply of tangible goods including machinery,
equipment and appliances for use, without
transferring right of possession and effective control
of such machinery, equipment and appliances."
10. It is submitted by Mr. Sharma that aircraft operators are only taking
passengers and when passengers board a chartered flight, service tax has
to be levied under clause (zzzo) and clause (zzzzj) has no application.
11. Regard being had to the language employed and the language
engrafted in the circular, we are of the considered view that the issue
raised falls in the realm of interpretation of the terms, namely "charter
agreement". Factual matrix in each case has to be examined. We cannot
examine and decide the issue in a vacuum. In praesenti, we are inclined
to think so because the circular uses the terms "where the crew is also
provided by the owners of the aircraft as in a wet lease of aircraft effective
control is not transferred". Mr. Sharma would submit that his activities
come within the scope of transport as he only transports passengers from
one place to other. Last part of the paragraphs 2 and 3 of the circular
would indicate that each case has to be adjudicated on its own facts.
12. We have been apprised at the Bar that there has been no
adjudication and decision so far. In view of the aforesaid, we are inclined
to think that adjudication should take place first and till the adjudication is
made, no coercive steps shall be taken against the members of the
petitioner-association. In case members of the petitioner-association are
aggrieved by any kind of adjudication, they can challenge the same before
the appropriate forum in accordance with law. The issue pertaining to the
validity of the circular is kept open. The writ petition is accordingly
disposed of without any order as to costs.
CHIEF JUSTICE
SANJIV KHANNA, J.
JULY 12, 2011/NA
