With a view to recover service tax dues pertaining to Kingfisher, Bombay High Court allowed auction of aircraft taken on ‘finance lease’ by Kingfisher but, in view of lessor’s contention that aircraft is lessor’s property, sale proceeds were directed to be deposited into Court
HIGH COURT OF BOMBAY
Mumbai International Airport (P.) Ltd.
Commissioner of Service Tax
WRIT PETITION NOS. 3013 OF 2014 AND 1673 OF 2015
AUGUST 14, 2015
Dinyar Madon, Sr. Adv., Ms. Shoma Maitra, Darius Khambata, Sr. Adv., Nikhil Sakhardande, Aditya Mehta, Adip Iyer and Ms. Priyanka Shetty for the Petitioner. Pradeep S. Jetly, Jitendra B. Mishra and Milind Sathe, Sr. Adv. for the Respondent.
1. We have taken on record today an affidavit of the Additional Commissioner of Service Tax – V Commissionerate, Mumbai.
2. After setting out the relevant facts, he has gone ahead and informed the Court that the Service Tax-V had detained the following Aircrafts and Helicopters belonging to M/s. Kingfisher Airlines to recover Service Tax amount due to the Government.
|Sr. No.||Aircraft type||VT Reg. And MSN No.||Ownership status|
|1||ATR 72||VT-KAE/MSN 737||Financial Lease|
|2||ATR 72||VT-KAF/MSN 738||Financial Lease|
|3||Airbus 319||VT-VJM/MSN 2650||Financial Lease|
|4||ATR 72||VT-DKH/MSN 739||Owned|
3. The subject matter of this Writ Petition is aircraft at Serial No. 3. It is stated to be under financial lease. It is urged that the lessee decides the goods to be purchased and its specifications and needed by the suppliers and consequently bears the risks and rewards incident to the ownership of the aircraft. After describing the nature of the transaction and according to the perception of this Commissioner, what has been urged before us is that the consortium of lending banks led by State Bank of India also claimed first charge by way of mortgage/charge on all assets of M/s. Kingfisher Airlines Ltd. excluding aircrafts and other assets which have been taken by Kingfisher Airlines Ltd. on financial/hire purchase basis. After referring to the proceedings before the DRT at Bangalore, what has been urged is that neither any order passed by this Court nor in Writ Petition NO. 19727 of 2014 by the High Court of Karnataka would pose any difficulty for this Commissioner to sale and dispose of this detained aircraft. There is no order or direction conflicting with the statements which have been made by this Commissioner and on oath.
4. It is in these circumstances and since statements of the Additional Commissioner are based on records that we are of the view that the time as sought by the Commissioner be granted so as to complete the action of sale and disposal of the aircraft. We accept all the statements and which are made on oath as undertakings given to this Court. Paras 20 and 23 of this affidavit read as under:—
“20. I say that the Service Tax Department is in the process of appointing a government-approved auctioneer capable of conducting a global auction for the aircraft VT-VJM (MSN 2650). I further say that in order to dispose off the aircraft VT-VJM (MSN 2650), a period of at least two months time would be required subject to the maintenance records/statutory audit records of the aircraft and its engines be submitted by M/s Kingfisher Airlines Ltd. to the Service Tax Department.
23. In view of the necessary steps proposed to be taken by the Service Tax Department as required in law to auction the aircraft presently lying in the premises of MIAL, it is submitted that the entire process would take about two months. Hence it is humbly prayed that a leave of two months period may be granted to the Service Tax Department for appointing a valuer at international level so that the aircraft is inspected, valued and the upset price is determined to initiate and complete the process of auction/sale of the aircraft VT-VJM (MSN 2650) and thus the Hon’ble Court may be pleased to pass such orders to enable the Service Tax Department to complete the steps as stated above.”
5. Prior thereto, in para 19, though the Service Tax Department has indicated that it is initiating active steps for the sale of detained aircrafts/helicopters belonging to M/s. Kingfisher Airlines Ltd. in conjunction with the State Bank of India led consortium of banks or independently, that is not pertaining to the aircrafts which are subject matter of this Writ Petition.
6. As far as the present Writ Petition and the subject matter thereof is concerned, we are informed that the statements in paras 20 and 23 reproduced above are the undertakings given to this Court. We accept the same accordingly.
7. At this stage, however, it was expressed by not only the Commissioner but their Counsel that to enable the Service Tax Department to comply with the statements/undertakings given to this Court, it would be necessary to take custody and charge of all the documents and records relating to the subject aircraft. Our attention has been invited by Mr. Jetly to the correspondence carried out in this regard and the letters which have been addressed to M/s. Kingfisher Airlines Ltd., copies of which are annexed to this Writ Petition.
8. As far as a letter at page 455 of the paper book Annexure ‘H’, which is dated 12th August, 2015 is concerned, it is a letter addressed two days prior to the date of hearing of this Petition. We inquired from the Kingfisher Airlines Ltd. as to whether they are in receipt of this letter and Mr. Sathe states that the letter at Annexure ‘H’ has not been received by M/s. Kingfisher Airlines Ltd. but they are in receipt of all prior letters. They are aware that request is made to furnish the records and documents pertaining to subject aircraft and which are stated to be in possession of the Airlines Company.
9. Today, we heard the matter at length on two occasions. On the first occasion, we inquired from counsel appearing for the airlines as to whether these records and documents and which are sought for by the Service Tax Department are available and in whose custody they have been kept till date. To enable the Counsel to take complete instructions, we granted half an hour time and took the matter again. On resumption of the hearing, Mr. Sathe-learned Senior Counsel informs the Court that the records and documents pertaining to this aircraft are in several godowns and belonging to Kingfisher Airlines Ltd., to which, the said airlines and the staff have access and easily without any interference. None of these godowns or places where these records are kept are in possession of any third party nor they constitute any security as far as the third parties and their rights are concerned. Mr. Sathe, on instructions, further informs the Court that as far as access to these godowns is concerned, that is free and there are no orders of either any Court, Tribunal or the High Court of Karnataka, restraining the Kingfisher Airlines Ltd. or their staff to have access and enter these godowns and take into possession and custody the relevant papers, documents and records. However, Mr. Sathe states on further instructions that the competent officers duly authorized by the airlines and in service will file a comprehensive affidavit in this Court clarifying the position within two weeks from today.
10. Presently this Court will proceed on the basis that the records and papers or documents in relation to this aircraft are available and can be accessed. We accept these statements and made today and give time to the Advocates to take complete instructions and file an affidavit of a competent and authorized officer in this Court. We would highly appreciate if the affidavit discloses as to within how much period and time the records would be accessed and thereafter handed over to the Service Tax Commissionerate. We would also highly appreciate if the competent official informs the Court on affidavit that the said airlines will extend all co-operation to the Department and allow it to appoint a valuer to have the valuation of the aircraft after all documents/papers are handed over. The further stand of the company should also be made clear and that is whether the company is agreeable to the aircraft being disposed of and in the manner thought fit and appropriate by the Service Tax Commissioner and in accordance with law.
11. We have passed this order after being informed that there is no direction and contrary to any of the above passed by any Court and in relation to this aircraft.
12. However, we must take note of the submission of Mr. Khambata-learned Senior Counsel appearing for the petitioner in the companion Petition and the Respondent No. 3 in Writ Petition No. 3013 of 2014. His contention is that this aircraft is the property of the third Respondent. It was given on lease to M/s. Kingfisher Airlines Limited. However, this third Respondent/owner has no objection to the aircraft being sold and disposed of by the Service Tax Commissioner/Commissionerate. The said third Respondent would render all assistance in that behalf. However, Mr. Khambata seeks leave of this Court to have access to the documents and records in relation to the subject aircraft once the Service Tax Commissioner takes custody and possession of the same. Mr. Khambata submits that this is in order to enable and facilitate the valuation being privately done by the third Respondent and the reports being handed over to the Commissioner which would assist him to determine the upset price.
13. We grant leave to the third Respondent and the learned Counsel appearing for the same to raise this issue once we have the affidavit of the airlines before us. We keep open this request and all contentions in relation thereto. We are aware that the concession given by the third Respondent and the statement made by Mr. Khambata, on instructions, is without prejudice to the rights and contentions of the third Respondent and particularly that the sale proceeds from the sale of aircraft shall not be disbursed and released but should be brought in this Court.