Delhi High Courts grants stay to helicopter charterer PSU Pawan Hans Ltd. against VAT demand of INR 176 crore

January 18, 2023

A Delhi High Court bench of Hon’ble Justice Vibhu Bhakru and Justice Amit Mahajan in a recent order granted interim relief to Pawan Hans Ltd. against an order passed by the Delhi VAT Tribunal confirming a demand of VAT amounting to approx. Rs.176 crore on account of chartering of helicopters.

Pawan Hans Ltd. is engaged in the business of chartering of helicopters to various State Governments, Union and State Ministries and PSU’s. The Delhi VAT department conducted an audit for the years 2006-2010 and held that the activity of chartering of helicopters by Pawan Hans amounts to transfer of right to use and hence, qualifies as ‘deemed sales’ subject to VAT. It is to be noted that Pawan Hans was discharging applicable Service tax on the said activity. Accordingly, the VAT department raised a demand of approximately INR 176 crore along-with interest and penalty. Pawan Hans filed an appeal against the said Order before the appellate authority which rejected the said appeal. Thereafter, Pawan Hans filed an appeal before the Delhi VAT Tribunal, which also dismissed the appeal and confirmed the demand of VAT. Penalty, however, was dropped. Aggrieved by the Order of the Delhi VAT Tribunal, Pawan Hans filed an appeal before the Delhi High Court. It was argued before the court that while providing the helicopters, Pawan Hans also provides its own pilots and crew to operate the helicopters. Further, Pawan Hans is also responsible for maintenance and repair of the helicopters.

After hearing the counsels for the parties, the Hon’ble Delhi High Court stated that the issue needs consideration and directed the VAT department not to initiate coercive measures for recovery of the VAT demand confirmed by the Delhi VAT Tribunal in the interim. The bench has posted the matter for March 16, 2023 for final hearing. Mr. Tarun Gulati, Senior Advocate along-with Mr. Rajat Bose, Partner and Ms. Shohini Bhattacharya, Associate from the law firm Shardul Amarchand Mangaldas & Co. is representing the PSU.