AIRPORT AUTHORITY OF INDIA Vs. COMMISSIONER OF SERVICE TAX
LAWS(CE)-2015-1-83
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on January 02,2015

AIRPORT AUTHORITY OF INDIA Appellant
VERSUS
COMMISSIONER OF SERVICE TAX Respondents


Referred Judgements :-

COMMISSIONER OF INCOME TAX V. B.C. SRIVIKAS SHETTY [REFERRED TO]
UNION OF INDIA V. MADHUMILAN SYNTEX LTD [REFERRED TO]
HOME SOLUTIONS (INDIA) V. UNION OF INDIA [REFERRED TO]
FLAMMINGO DUTYFREE SHOPS PVT. LTD. V. UNION OF INDIA [REFERRED TO]
OIL AND NATURAL GAS COMMISSION VS. COLLECTOR OF CENTRAL EXCISE [REFERRED TO]
R M INVESTMENT AND TRADING CO PVT LIMITED R M INVESTMENT AND TRADING CO PVT LIMITED VS. BOEING CO:BOEING CO [REFERRED TO]
P C PAULOSE VS. COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS [REFERRED TO]
ELECTRONICS CORPORATION OF INDIA LTD VS. UNION OF INDIA [REFERRED TO]
COMMISSIONER CENTRAL EXCISE VS. COCHIN INTERNATIONAL AIRPORT LTD [REFERRED TO]
INDIAN NATIONAL SHIPOWNERS ASSOCIATION VS. UNION OF INDIA [REFERRED TO]
Hindustan Steelworks Construction' Ltd. VS. Union of India [REFERRED TO]
HOME SOLUTIONS RETAILS LTD. VS. UNION OF INDIA [REFERRED TO]


JUDGEMENT

Rakesh Kumar, Member (T) - (1.)THE facts leading to filing of these appeals and miscellaneous applications by the Interveners are, in brief, as under: - -
"1.1 Airport Authority of India (hereinafter referred to as "AAI") has been constituted under Airports Authority of India Act, 1994 as amended by Airport Authority of India (Amendment) Act, 2003, for better administration and cohesive Management of all the Airports and Civil Enclaves in India whereat air transport services are operated and also for control of aeronautical communication stations for civil aviation. With effect from 10.09.04, sub clause (zzm) was added to clause (105) of section 65 of the Finance Act, 1994 and in terms of this sub clause, "any service provided to any person in an airport or a civil enclave by AAI or any person authorised by it", was brought within the definition of "taxable service" and accordingly such services became taxable. In terms of section 65(3d) of the Finance Act, 1994, "Airport Authority" means Airport Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 and includes any person having charge of management of an Airport or a Civil Enclave. In terms of section 65(3c) and 65(24a) of Finance Act, 1994, the words Airport' and 'Civil Enclave' have meaning assigned to them in clause (b) and (i) respectively of section 2 of the Airports Authority of India Act, 1994. Accordingly 'Airport' means landing or taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes Aerodrome, as defined in section 2(2) of the Aircraft Act., 1994. In terms of section 2(2) of the Aircraft Act, "Aerodrome" means any definite and limited ground or water area intended to be used, either wholly or in part, for landing or departure of aircrafts and includes all buildings, sheds, vessels, piers or other structure thereon or appertaining thereto. In terms of section 2(i) of the Airports Authority of India Act, 'Civil Enclave' means the area, if allotted at an airport belonging to any armed force of the union, for use by persons availing of air transport service from such airport or for handling of baggage or cargo by such services and includes land comprising of any building and structure on such area.

1.2 Prior to 10.09.2004, cargo handling service including that being provided at the Airports/Civil Enclaves was taxable of Section 65(105)(zv) read with Section 65(23) of the Finance Act, 1994. The dispute in this case is about services being provided at the airports which are other than cargo handling services. In this regard, sometime in Jan '05, the officers of Directorate General of Central Excise Intelligence conducted inquiries with the various officials of AAI. In course of enquiry, Investigating Officers found that other than the Revenue from cargo handling, there are two other streams of revenue for the Airport Authority of India i.e. Traffic Revenue and non -Traffic Revenue. The Traffic Revenue consists of Route Navigation Facility Charges (RNFC), Terminal Navigation Landing Charges (TNLC), aircraft landing fee, Aircraft parking and housing charges and passenger service fee. Non Traffic Revenue earned by the AAI is from Public Admission Fees, Rent and Services, Trading & Concession, Car Parking, Left Luggage Facilities, Retiring Room Facility, issue of Season Tickets and Temporary Passes for persons of various contractors, business establishments and concessionaires allowed by the AAI to operate inside the Airports/Civil Enclaves, Supply of Trolley to Couriers and other miscellaneous income. In respect of the Revenue from Traffic related activities, the Department was of the view that in addition to the facilities of landing, parking and handling of the aircrafts, provided by the AAI, the facilities of route navigation to overflying aircrafts, terminal navigation facilities provided to the aircrafts, landing at an Airport/Civil Enclave and passenger service fees, would also be covered by the term "any service provided by Airport Authority of India or a person authorised by it in the airport/Civil Enclave" and would be taxable under section 65(105)(zzm). In respect of Revenue from non -traffic activities, the Department was of the view that all the activities including activities of renting of space inside Airports/Civil Enclaves to various persons for commercial activities would also be covered by Section 65(105)(zzm) and would be taxable.

1.3 During the inquiry by the DGCEI Officers, the AAI vide their letter dt. 28.03.05 requested the Jurisdictional Assistant Commissioner, service tax, that the assessment of service tax for the period from 10.09.04 to 31.03,05 may be considered to be provisional in terms of Rule 6(4) of the Service Tax Rules, 1994, and that for subsequent period, the assessment may be done on provisional basis. Subsequently a similar request was made by AAI vide their letter dt. 18.10.05 for provisional assessment for period from 01.04.05 to 30.09.05. On the basis of these letters, the Assistant Commissioner vide letter dt. 29.03.05 directed AAI to pay service tax on provisional basis under Rule 6(4) of Service Tax Rules 1994 for the month of March '05 subject to certain conditions as specified in this letter. Accordingly, AAI started paying service tax on provisional basis and paid some amount for the period prior to March '05. The Appellant also filed ST -3 Returns for period from Sept. '04 to March '05 on 26.07.05. The Assistant Commissioner vide letter dt. 21.10.2005 also ordered provisional assessment for period from 01.04.05 to 30.09.05.

1.4 On conclusion of the enquiry, Show Cause Notice dt. 18.07.2006 read with corrigendum dt. 19.09.06 was issued to AAI by ADG, DGCEI Mumbai demanding a total service tax of Rs. 308,44,21,797/ - in respect of Traffic Revenue collected for the period from 10.09.04 to 31.06.06 along with interest and also service tax of about Rs. 53.35 Crores for the period from 10.09.04 to March '06 in respect of non -Traffic Revenue received during this period, along with interest. The Show Cause Notice proposed for appropriation of the amount paid by AAI towards their service tax liability and also imposition of penalty on them under section 76, 77 & 78 of the Finance Act, 1994.

1.5 The above Show Cause Notice was adjudicated by Commissioner vide Order -in -Original No. 42/RK/06, dt. 15.12.06 by which the Commissioner finalized the provisional assessments and confirmed the service tax demand for the entire period of dispute as made in the Show Cause Notice, except for dropping the demand of about Rs. 7.05 Crore on the amount received for letting out space inside the Airports/Civil Enclaves for display of hoardings/advertisement, along with interest thereon under Section 75. He also imposed penalty of Rs. 1000/ - on the Appellant under section 77 for various acts and omissions and penalty under section 76 of Rs. 200/ - per day till the date of payment of service tax demand, subject to the total penalty amount not exceeding the amount of service tax due, for failure to discharge the service tax liability by the due date. No penalty was imposed on the appellant under section 78 on the ground that this is not a case where the Assessee intended to defraud the exchequer by purposely evading the payment of service tax.

1.6 Since at the time of passing of the Adjudication Order, in terms of Apex Court's judgment in case of Oil & Natural Gas Commission v. Collector reported in : 1992 (61) ELT -3 (SC) for filing of appeal to the Tribunal or any court by a Government Department or a Central Public Sector Undertaking, clearance from a high power committee (Committee on Disputes) constituted by the Central Government was required, the appellant placed their case before the COD for seeking Clearance for challenging the Commissioner's order. In terms of the minutes of the COD Circulated vide Cabinet Secretariat letter dt. 21.11.07, the Appellant were allowed to challenge the Commissioner's Order on the issue of demand of service tax on "Route Navigation Facility Charges" (RNFC), received by the Appellant from various Airlines and on the revenue earned by the appellant from other activities namely -: "Passenger Service Fee" (PSF), "X -Ray Baggage Inspection Charges", "Licensing of Space" and "Extension of Watch Hours". According to the Minutes of COD meeting, service tax was payable on charges for "Terminal Navigation Landing Charges", and "Landing & Parking Charges". According to the Appellant the total amount of service tax involved in respect of RNFC, X -Ray Baggage Inspection Systems Charges, PSF, Licensing of Space and Extension of Watch Hours, which is under dispute, is about Rs. 169.7 Crore. Service tax involved on the disputed Traffic Revenue is Rs. 123.40 Crore, and the service tax involved on disputed Non -Traffic Revenue is Rs. 46.30 Crore (excluding demand of about Rs. 7.05 Crore in respect of letting out of space for hoardings/advertisements, dropped by the Commissioner).

1.7 After receiving the clearance from the COD for filing appeal, the appeal No. ST/118/07 has been filed by the appellant.

1.8 The Revenue has filed an appeal No. ST/142/07 against the part of the Commissioner's Order by which the service tax demand of about Rs. 7.05 Crore on the amount received for letting out of space for display of hoardings/advertisement was dropped. Thus total service tax involved on the disputed non Traffic Revenue of the Appellant is about Rs. 53.35 Crore.

1.9 M/s. Hans Enterprises, M/s. Jet Airways (I) Ltd., M/s. Higginbothams Pvt. Ltd. and M/s. Aero Art Emporium Pvt. Ltd., M/s. P.K. Hospitality and M/s. Garuda Aviation are the persons who have been given certain space in the Airports/Civil Enclaves on lease basis by the appellant (AAI). Since the demand of service tax on the lease amount being received by the AAI from these persons adversely affected them, as the service paid by the AAI would be recovered by AAI from them, all of them moved Hon'ble Delhi High Court for being impleaded as interveners in the appeal filed by the AAI. Accordingly in terms of the orders of Hon'ble Delhi High Court, the miscellaneous applications filed by M/s. Aero Art Emporium, M/s. Jet Airways, M/s. Higginbothams Pvt. Ltd. and M/s. Hans Enterprises were accepted and they have been allowed to be impleaded in these proceedings as interveners. The miscellaneous application for impleadment as interveners, filed by M/s. P.K. Hospitality and M/s. Garuda Aviation are also allowed and they are also allowed to be impleaded in these proceedings as interveners."

(2.)HEARD both the sides as well as the Interveners.
Sh. A.K. Batra, Chartered Accountant, the learned counsel for the appellant, pleaded that the dispute in respect of the appeal filed by the AAI is only in respect of the part of Traffic Revenue consisting of the charges received for Route Navigation Facility Charges (RNFC), Terminal Navigation Landing Facility Charges (TNLC) and passenger service fee and Non -Traffic Revenue from Public Admission Fees, Trading and Concession, Rent & Services, Car Parking, Rest Room facility, Left Luggage Facilities, Retiring Room facility, issue of Season Ticket and Temporary Passes, Supply of Trolleys for Courier Services and miscellaneous income, that the total service tax involved on the charges received for Route Navigational Facilities provided to the Airlines in respect of their overflying aircrafts is about Rs. 108.20 Crore and the service tax involved on the charges for Terminal Navigation Landing Facility is about Rs. 15.20 Crore, that the service tax involved on Non -Traffic Revenue as mentioned above is about Rs. 53.35 Crores out of which the service tax demand of about Rs. 7.05 Crore on the amount received for letting out the space for display of hoardings/advertisement has been dropped by the Commissioner, that in terms of section 65(105)(zzm) read with section 65(3c), 65(3d) and 65(24a), service tax is attracted in respect of any service provided in an Airport/Civil Enclave by AAI or by a person authorised by AAI, to any person, that expression "any Service" would include only the taxable services and would not include the services which are not taxable, that for this reason only, when the clause (zzm) was added to section 65(105) with effect from 10.09.2004, the Tax Research Unit of CBEC vide Circular No. dt. 17.09.04 had clarified that only the services provided by the AAI or persons authorised by the AAI, in the Airports/Civil Enclaves would attract service tax under this entry and that no service tax would be chargeable on rental/lease charges for part of Airport/Civil Enclave Premises, as the activity of letting out the premises is not rendering of service, that letting out of immovable property for business/commercial purposes became a taxable service with introduction of Clause (zzzz) to section 65(105) with effect from 01.06.07, and therefore, during the period prior to this date, which is the period of dispute in this case, no tax would be chargeable on the amount received by the appellant for letting out of any space in the Airports/Civil Enclaves to any person for commercial purpose, that Hon'ble Delhi High Court in case of Flammingo Dutyfree Shops Pvt. Ltd. v. Union of India reported in, 2012 (28) STR -49 (Delhi) has held that in view of the Board's Circular No. dt. 17.09.04 clarifying that renting/leasing of immovable property did not constitute service, for the period prior to 01.06.07, no Service Tax would be chargeable under section 65(105)(zzm) on the lease/rental charges received by the Airport Authority of India from any person for leasing/renting of a part of premises of an Airport/Civil Enclave to him for commercial activity, that same view has been taken by Hon'ble Bombay High Court in case of Sahara Airlines Ltd. v. Union of India vide judgment dt. 17.07.12 in respect of Writ Petition No. 421/07 and also by Hon'ble Kerala High Court in case of C.C.E. v. Cochin international Airport Pvt. Ltd., reported in : 2011(24) STR -20 (Kar.), that proviso to Section 65(105)(zzm) providing that the provisions of Section 65A shall not apply for any service when the same is rendered wholly within an airport or a civil enclave was added w.e.f. 01.07.2010 and therefore during the period prior to 01.07.2010, the services in dispute, which, in terms of section 65A, are not covered by any other clause of Section 65(105), would not be covered by section 65(105)(zzm), that in view of this, service tax demand of Rs. 47,54,54,657/ -, on the amount of Rs. 513,67,74,817/ - received as "Rent & Service" and "Trading & Concession" is not sustainable, that Service Tax demand of Rs. 86,74,775/ - has been made on the miscellaneous income of Rs. 9,37,21,958/ - of the Appellant, that this amount received consists of Staff Recruitment Fee, Unclaimed Earnest Money/Security Deposit, Liquidated damages, sale of scrap etc. and the same has nothing to do with provision of any service in Airports/Civil Enclaves, that supply of Trolleys by the Appellant to Couriers in respect of which there is service tax demand of Rs. 3,73,463/ - was not taxable at all/oil during the period of dispute as this activity is supply of tangible goods services which became taxable only w.e.f. 16.05.2008 and therefore no service tax can be charged in respect of this activity under section 65(105)(zzm) as service provided in the Airport, that service tax of Rs. 2,04,78,248/ -has been demanded on the amount of Rs. 22,12,45,387/ - received under Head "Public Admission Fee", that Public Admission Fee at specified rate is charged from the visitors entering into the Airport, that licence for management of Airport entry is given by the appellant to a person after inviting competitive bids, that in respect of the appellant's contract with successful bidder (licensee), while the appellant receives a fixed amount (licence fee) from him for a particular period, the licensee during the period of agreement, collects the entry fee from the visitors entering into the Airport, that the amount received by the appellant from the licensee for management of Airport entry is in the nature of rent and hence is not liable to be taxed under the category "Airport Services", that in any case, service tax on public admission fee cannot be charged from the appellant but has to be charged from the licensee, as it is the licensee who is providing the service and in this regard the Appellant relies upon the Apex Court's judgment in case of PC Paulose, Sparkway Enterprises v. CCE reported in : 2011 (21) STR -353 (SC), that service tax demand of Rs. 2,57,84,288/ - has been raised on the amount of Rs. 27,85,71,427/ - received under the Head "Car Parking", that the appellant have granted licence to the successful bidder for managing the facility of Car Parking, for which the appellant charged a lump sum amount (licence fee) from the licensee and it is the licensee who provided the Car Parking Facility to the persons coming to the Airports/Civil Enclaves and collected the Car Parking Fee from them, and therefore for this activity, the service tax cannot be chargeable from the Appellant, that since the area of car parking is not part of the Airport/Civil Enclaves, this service, in any case, is not taxable under section 65(105)(zzm), that similarly the season tickets/temporary passes to the persons of the contractors, licensees/concessionaire bup9/; hunyys or business establishments operating in the Airports/Civil Enclaves with the permission of the Appellant are issued by the licensee from whom the Appellant receive a fixed amount in lieu of transfer of right to him of issuing passes/season tickets, by charging a fee, and therefore no service tax can be charged from the Appellant for this activity and accordingly, the service tax demand of Rs. 31,04,158/ - on this account is without any basis, that service tax demands of Rs. 1,91,716/ -, Rs. 2,03,747/ - and Rs. 7,08,238/ - are in respect of the services of left luggage, Restroom and retiring rooms facility respectively, provided by the Appellant to the passengers and since this service was not taxable, no service tax can be charged in respect of these activities, that as regards the service of Route Navigation provided to the Aircrafts of various Airlines overflying the Airports/Civil Enclaves and the Terminal Navigation Landing Facility provided to the Aircrafts, landing at a particular Airport/Civil Enclave, this is not a service provided in Airports/Civil Enclaves, as this service is provided from the Aeronautical Communication Stations which are not necessarily situated in the Airport area, that the necessary equipment for providing Route Navigation Facility and Terminal Navigation Landing Facility is not always installed within the areas, of the Airports/Civil Enclaves and, hence, this service cannot be said to be the service provided in the Airports/Civil Enclaves and would not be exigible to service tax that in this regard, the words " in an airport or a civil enclave" in clause (zzm) of Section 65(105) cannot be read as "from an airport or a civil enclave", and hence the Service Tax demand of about Rs. 123.40 Crore is without any basis, that the service tax demand of Rs. 7.05 Crore in respect of charges for letting out space for display of hoardings/advertisements has been correctly dropped by the Commissioner, as this was not a taxable service during the period of dispute and hence is not covered by section 65(105)(zzm) and that in view of this, there is no merit in the Revenue's appeal against the part of the Commissioner's Order dropping service tax demand in respect of the amount received by the appellant for letting out the space for display of hoardings/advertisement. He also pleaded that in view of the Commissioner's finding that there was no intention on part of the Appellant to defraud the exchequer by deliberately evading the Revenue, there is no justification for imposition of penalty on the Appellant under section 76 and 77 and the penalty under these sections should have been waived by the Commissioner by invoking section 80 of the Finance Act, 1994.

(3.)SH . Suresh Virmani, C.A. and Mrs. Zahida Shamim, Advocate, representing M/s. Aero Art Emporium, Sh. V.A. Rana, Advocate & Ms. Mrinal, Advocate, representing Jet Airways, Sh. Jitender Singh, Advocate and Ms. Anushree Kapadia, Advocates, representing Higginbothams Pvt. Ltd. and Sh. A.K. Batra, C.A., and Ms. Geetanjali, C.A., representing M/s. Hans Enterprises who were impleded as interveners, pleaded that the Appellant AAI have let out empty space to them in the Airports/Civil Enclaves on which they have set up their Shops/Offices to do their business, that they pay a fixed amount of rent to the Appellant for the space let out to them, that letting out of space inside the Airports/Civil Enclaves by the Appellant (AAI) is not a service and hence no service tax is attracted on the same, that this had been clarified by the Board in its Circular No. dt. 17.09.04 wherein it had been stated in very clear terms that in case, a part of an Airport/Civil Enclave premises is rented/leased out, the rental/lease charges would not be subjected to service tax, as the activity of letting out premises is not rendering of service and that Hon'ble Bombay High Court in case of Sahara Airlines Ltd. v. U.O.I. [WP (c) 7145/2011] and Hon'ble Delhi High Court in case of Flammingo Dutyfree Shops Pvt. Ltd. (Supra) have, taking note of the above mentioned circular of the Board, held that for the period prior to 01.06.07, no service tax would be chargeable on lease/rental charges received by AAI from any person for lease/renting of a part of the premises of an Airport/Civil Enclave to him for any commercial activity, that same view has been taken by the Hon'ble Kerala High Court in case of CCE Cochin v. Cochin International Airport [CE Appeal No. 16/2008] and that in view of this, neither any service tax can be charged by the Department on the rental/lease amount received by the Appellant (AAI) from them, nor AAI can recover any amount representing service tax from them.
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