Airports Authority Services At Airports Are Taxable Under Sub‑clause (zzm); Export Cargo Handling Not Exempted

A bench of Justices Pankaj Mithal and Prasanna B. Varale heard an appeal by the Airports Authority of India (AAI) challenging CESTAT’s confirmation of service tax liability for services rendered in handling export cargo, and considered whether such services fell outside the chargeability of service tax by virtue of the exclusion of “handling of export cargo” from the definition of “cargo handling service”.

The Court dismissed the appeal and held that services rendered by the Airports Authority at airports were taxable under sub‑clause (zzm) of Section 65(105) read with the charging provision in Section 66 of the Finance Act, 1994. The judges explained that the definition of “taxable service” under sub‑clause (zzm) was “wide enough to cover any kind of service provided to any person by the Airports Authority in any airport or a civil enclave” and therefore services relating to export cargo, after 10.09.2004 when (zzm) took effect, fell within the taxable ambit. The Court, in its reasoning, observed: The judgment further noted that “the exclusion of ‘export cargo’ from the definition of ‘cargo handling service’ makes no difference as to the chargeability of service tax on the services so rendered.”

Background

The AAI was registered for service tax and performed a range of activities in handling cargo at airports, including unloading, carting, X‑ray and export packing, from acceptance of cargo for shipment until placement on the aircraft. The Commissioner (Adjudication), Service Tax, Delhi issued an order dated 17.03.2010 confirming a service tax demand for the period 01.10.2003 to 31.03.2007 under the category “Storage and Warehousing Service” up to 09.09.2004 and thereafter under “Airport Services” w.e.f. 10.09.2004. AAI appealed to the CESTAT, which confirmed the taxability under “Airport Services” with effect from 10.09.2004. AAI then filed the present appeal under Section 35L of the Central Excise Act, 1944.

Counsel for the appellant argued that services relating to handling of export cargo were excluded by the proviso to Section 65(23) (definition of “cargo handling service”) and therefore could not be taxed. The respondent relied on the express language of sub‑clause (zzm) of Section 65(105), which, inserted w.e.f. 10.09.2004, specifically included “service provided to any person by Airports Authority or by any other person, in any airport or a civil enclave” within the definition of “taxable service”. The Court explained the statutory scheme by distinguishing the definitional provision (Section 65) from the charging provision (Section 66), and held that the wide definition under (zzm) brought the impugned services within the charge. The judgment observed that circulars relied on by the appellant could not override the express statutory provisions.

The Court therefore upheld CESTAT’s decision, dismissed the appeal and left the tax liability as confirmed from 10.09.2004. There were no interim directions reported in the decree; pending applications, if any, stood disposed of.

Case No.: CIVIL APPEAL NO. 17405/2017 Case Title: AIRPORTS AUTHORITY OF INDIA v. COMMISSIONER OF SERVICE TAX Appearances: For the Petitioner(s): Mr. Y. K. Kapur, learned counsel For the Respondent(s): Ms. Nisha Bagchi, learned senior counsel