Providing Helicopters on Hire Amount to ‘Supply of Tangible Goods Service’: CESTAT upholds Service Tax Demand [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the activity of providing helicopters on hire would amount to “Supply of Tangible Goods Service” under the Finance Act,1994.

The decision was based on the Tribunal decision in Global Vectra Helicorp Ltd. wherein it was held that the services of charter hire of helicopters merits classification under supply of tangible goods for use services.

Appellant holds a permit issued by the Director General of Civil Aviation (DGCA), New Delhi permitting them to operate ‘Non-Scheduled Air Transport (passenger/cargo/charter)’. They used their helicopter of type Bell407 having a sitting capacity of 6 passengers. The helicopter belonging to them were made available to various entities for their use as per the terms and conditions of the agreement between them. While providing the said helicopter on charter hire, the appellant supplied their own crew i.e. Pilot and other flight staff. The maintenance and upkeep of the aircraft was the responsibility of the appellant. For these services, the appellant received certain amounts as per the terms and conditions entered into with the chartering parties.

The Department was of the view that the activity carried out by the appellant was liable to service tax under the category of “Supply of Tangible Goods Service” (STGS) taxable under Section 65(105)(zzzzj) of the Finance Act, 1994.

On appeal, the appellant claimed that the activity will be liable to service tax only under the category of ‘Transportation of Passenger by Air’ within India under Section 65(105)(zzzo), which became liable for payment of service tax for journey within India only w.e.f. 01.07.2010.

The services of the appellant are confined only to transport of passengers by air and nowhere extend to supplying the aircraft for use by the passengers at their disposal. Therefore, services of the appellant are classifiable under ‘Transport of Passenger by Air Service’ for nonscheduled flights.

Following the decisions in Global Vectra Helicorp and Mesco Airlines, the Tribunal upheld the views of the lower authorities that the above activity would fall under the category of STGS.