Classification of service under airport is not proper if service is not taxable otherwise.

PJ/CASE LAW/2015-16/2589

Case:COMMISSIONER OF CENTRAL EXCISE, MUMBAI Vs ROYAL CARPET CLEANERS

Citation:2014 (36) S.T.R. 863 (Tri. - Mumbai)

Brief Facts:The appeal and stay petition are directed against Order-in-Appeal No. 15, dated 10-1-2013 passed by Commissioner of Central Excise & Service Tax, Mumbai. Vide the impugned order, the learned appellate authority has confirmed the Service Tax demand of Rs. 2,70,249/- in respect of “manpower supply services” rendered during June to September, 2005 and set aside the demand pertaining to the said service for the period prior to 1-6-2005, that is for the period September, 2004 to May, 2005 and ordered refund of the same to the respondent, M/s. Royal Carpet Cleaners. Aggrieved of the same, the Revenue is before Tribunal.

Appellant contentions: The contention of the Revenue is that “airport services” as defined in Section 65(105)(zzm) includes any service provided or to be provided to any person by the airports authority or by any other person authorized by it, in any airport or civil enclave. The services undertaken by the respondent is that of supply of manpower for cleaning of the aircrafts. The contention of the Revenue is that for the period prior to 1-6-2005, the said services of manpower supply would be leviable to tax under “airport service” both prior to and with effect from 1-6-2005 and therefore, setting aside of the Service Tax demand of Rs. 5,42,512/- for the period prior to 1-6-2005 is incorrect in law. Therefore, he pleads for grant of stay.

Respondent Contention: None represented the respondent despite notice nor any adjournment has been sought.

Reasoning of Judgment: Service Tax in India prior to 2012 was selective in scope of levy and all activities were not taxed, but only taxable services as defined in law were liable to tax. Even when “Airport Service” was introduced, a service which was not a taxable service, was not liable to Service Tax under the “Airport Service” if the said service performed outside the Airport or Civil Enclave was not taxable. A Circular issued by the C.B.E. & C. in this regard clarifies this position. Circular dated 17-9-2004 as regards Airport service clarified as follows :

“Airport services : Services provided in an airport or civil enclave, to any person by Airports Authority of India (AAI), a person authorized by it, or any other person having charge of management of an airport are taxable under this category. This includes variety of services provided to airlines, as well as for cargo and passenger handling such as security, transit facilities, landing charges, terminal navigation charges, parking and housing charges and route navigation facility charges. It would be on the gross amount chargeable by AAI or other such authorized person. Thus, charges such as royalty, licence fees, etc., collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services, etc., are chargeable to service tax. However, in case a part of 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 a service.”

From the underlined portion above, it is clear that if an activity is not taxable service as defined in law, even if it is rendered within the airport, it would not be taxable. That is why the renting of immovable property in an Airport prior to 1-6-2007 was not taxable under the “Airport Services” since “renting of immovable property” was not a taxable service. Similarly, there are other services performed in the Airport, such as Porterage Services, Escort Services, Wheelchair Services and so on. It is not the case of the Revenue that they are collecting Service Tax on these services rendered in the Airport as these are not taxable services otherwise. On the same logic, supply of manpower services cannot be taxed prior to 1-6-2005 under the category of airport services.

Thus, the Revenue has not made out a case for grant of stay. Therefore, the stay petition is dismissed as devoid of merits.

Decision: Stay petition dismissed.

Comment: The crux of the case is that if an activity is not taxable service as defined in law & even if it is rendered within the airport, it would not be taxable. Thus, ‘supply of manpower services’ cannot be taxed prior to 1-6-2005 under the category of airport services because the services of supply of manpower were not leviable to service tax prior to 1.6.2005.

Prepared By:Meet Jain

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PJ/CASE LAW/2015-16/2589

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