Airports Authority of India Vs Commissioner of Service Tax (Supreme Court of India)
The Supreme Court of India dismissed an appeal by the Airports Authority of India (AAI), upholding the levy of service tax on its cargo handling services. The AAI, a government organization, challenged the tax, arguing that services related to the handling of export cargo should be exempt. The dispute arose from a Commissioner (Adjudication), Service Tax order dated March 17, 2010, which confirmed a service tax liability on the AAI for the period of October 1, 2003, to March 31, 2007. The initial levy was categorized as “Storage and Warehousing Service” until September 9, 2004, and then as “Airport Services” thereafter. The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) had previously upheld the tax liability under the “Airport Services” category, effective from September 10, 2004.
The AAI’s counsel, Y. K. Kapur, argued that the services fell under the definition of “cargo handling service” in Section 65(23) of the Finance Act, 1994, which explicitly excludes “handling of export cargo.” The AAI contended that this exclusion meant the services were not taxable. However, the Supreme Court, after hearing the arguments, found this interpretation to be flawed. The Court clarified that Section 65 is a definitional section, not a charging section. The charging provision for service tax is Section 66, which levies tax on “taxable services” as defined in Section 65(105). The Court highlighted that Section 65(105)(zzm) defines “taxable service” as “any service provided or to be provided to any person by Airports Authority or by any other person, in any airport or a civil enclave.”
