Service Tax - Services rendered by Airports Authority of India in relation to export cargo are "taxable service"

Supreme Court Upholds Service Tax Liability on Airports Authority of India for Export Cargo Services. Services provided by Airports Authority of India at airports deemed taxable under Finance Act, 1994, despite exclusion from "cargo handling services."

In a significant ruling, the Supreme Court of India has upheld the service tax liability of the Airports Authority of India (AAI) for services rendered in relation to export cargo, asserting the applicability of service tax under the Finance Act, 1994. The judgment was delivered by a bench comprising Justice Pankaj Mithal and Justice Prasanna B. Varale in the case titled "Airports Authority of India v. Commissioner of Service Tax."

The case stemmed from a dispute where AAI, responsible for managing various airports across India, challenged the decision of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) which confirmed the service tax liability on AAI for handling export cargo under the category of "Airport Services" from September 10, 2004, onwards.

The crux of the matter centered on the interpretation of the Finance Act, 1994, specifically Section 65 which defines "cargo handling service" and "taxable service." AAI contended that handling of export cargo is excluded from "cargo handling services" as defined under Subsection (23) of Section 65, thereby exempting it from service tax.

However, the Supreme Court clarified that while the definition of "cargo handling service" excludes handling of export cargo, this exclusion does not extend to the definition of "taxable service" under Subsection (105) of Section 65. The Court noted that sub-clause (zzm) of this section, introduced from September 10, 2004, encompasses any service provided by the Airports Authority or any other person at an airport, making it a "taxable service."

Justice Mithal, delivering the judgment, highlighted that Section 66, the charging section of the Act, levies service tax on "taxable services" as referred to in various sub-clauses, including (zzm). Therefore, services related to export cargo provided by AAI at airports fall under the ambit of taxable services, subject to service tax.

The Court dismissed the appeal by AAI, reaffirming the decision of CESTAT and stating that circulars relied upon by AAI's counsel cannot override the statutory provisions of the Act. The ruling emphasizes that all services provided by AAI at airports, including those in relation to export cargo, are taxable under the Finance Act, 1994, from the specified date.

This judgment underscores the broad interpretation of taxable services under the Finance Act, 1994, ensuring comprehensive taxation of services provided at airports. The decision marks a significant precedent in service tax jurisprudence, reinforcing statutory tax obligations on services rendered by government entities.

Bottom Line:

Services rendered by Airports Authority of India in relation to export cargo are taxable under "taxable service" defined in sub-clause (zzm) of Sub-section (105) of Section 65 of the Finance Act, 1994, with effect from 10.09.2004, notwithstanding the exclusion of "handling of export cargo" from "cargo handling

Statutory provision(s): Sections 65(23), 65(105)(zzm), 66 of the Finance Act, 1994

Airports Authority of India v. Commissioner of Service Tax, (SC) : Law Finder Doc Id # 2782694