CESTAT exempts Bombay Flying Club from tax demand for DGCA-approved training

CESTAT exempts Bombay Flying Club from tax demand for DGCA-approved training

Cites the judgments of the Supreme Court and the Delhi High Court in previous cases

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has provided reprieve to the Bombay Flying Club (BFC) by quashing service tax demands on its aircraft maintenance engineering training programs and aircraft repair services provided to members.

The Club, registered as a non-profit organization, provides Director General of Civil Aviation (DGCA)-approved training in aircraft maintenance engineering and undertakes maintenance and repair of aircrafts owned by club members.

The Income Tax Department viewed the services as taxable under ‘commercial coaching and training’ and ‘management, maintenance and repair services’, invoking Section 65(105)(zzc) and Section 65(64) of the Finance Act, 1994.

According to four show cause notices issued between 2008 and 2011, the Commissioner of the Goods and Services Tax (GST) and the Central Excise confirmed a tax demand of Rs.2,56,05,682, including interest and penalties.

However, the separate proceedings for Financial Year (FY) 2011–12, got a partial relief from the Commissioner of Income Tax (Appeals), who upheld the non-taxability of training services but confirmed the demand on repair services.

Aggrieved by the order, the Club approached the CESTAT.

Meanwhile, the IT Department also challenged the relief granted on training services.

The bench of Dr. Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member), examined whether the Club's DGCA-approved training qualified as commercial coaching’.

It relied on the judgment of the Delhi High Court in the Indian Institute of Aircraft Engineering v. Union of India (2013), case.

The CESTAT held that training recognized by law, even if followed by a licensing exam, did not lose its legal recognition. It referred to Rule 133B of the Aircraft Rules, 1937 and a 19 May 2011, DGCA letter, confirming that such training was necessary for licence eligibility.

Thus, the tribunal ruled that the course completion certificate was recognized by law and the training was not taxable, particularly due to the 25 April 2011 Notification No. 33/2011-ST.

The judges noted that the Club charged only the cost of overhauling and rendered the services to its members.

It cited the ruling of the Supreme Court in the State of West Bengal vs. Calcutta Club Ltd. (2019), case, and held that the doctrine of mutuality applied and the services could not be taxed. It added that a club could not render services to itself.

While allowing the Club’s appeals, the tribunal dismissed the appeal of the IT Department. It further set aside the demands, interest, and penalties.

The Bombay Flying Club was represented by Yogesh S. Patki, while Adeeb Pathan appeared for the IT Department.