2011 (1) TMI 11 - SC - Service Tax

Licensee's Tax Liability Upheld by Supreme Court for Service Tax Payment

The Supreme Court upheld the tax liability on the appellant, a licensee of the Airport Authority of India (AAI), for service tax payment. The appellant's ... Service tax on airport services - person authorised by Airport Authority - agency versus principal - liability of an authorised person to pay service tax - interpretation of statutory definition of taxable serviceService tax on airport services - person authorised by Airport Authority - agency versus principal - liability of an authorised person to pay service tax - Whether the licencee (appellant) collecting airport admission charges on behalf of AAI is liable to pay service tax as a person authorised by the Airport Authority or is merely an agent with no liability to pay service tax. - HELD THAT: - The licence agreement conferred on the appellant authority to collect admission charges and to provide amenities and facilities at the airport; it required the licensee to bear expenses, pay rates and taxes leviable on the licensee, maintain proper accounts subject to inspection by AAI and to charge rates approved by AAI. The statutory definition of taxable service under Section 65 (Clause 105(zzm)) of the Finance Act, 1994 covers services provided by the Airport Authority or by a person authorised by it in an airport. On the facts, the appellant was an authorised person providing the charged services under express contractual terms and therefore, for the purposes of the statutory definition, stepped into the shoes of AAI in respect of those services. Consequently the appellant was not merely a collecting agent but the authorised service provider liable to discharge service tax on the admission charges collected for the period in question. The Court rejected the contention that only AAI, as principal, could be treated as the service provider when the licence empowered the appellant to provide the services and to collect charges on a contract basis. [Paras 2, 11, 12]Appellant is an authorised person under the statutory definition and is liable to pay service tax on the airport admission charges for the relevant period.Final Conclusion: Appeal dismissed; the licencee who, under the licence agreement, provided the airport admission services and collected charges as an authorised person of AAI is liable to pay service tax for the period 10.09.2004 to 31.03.2005. Issues:1. Liability of the licensee for service tax payment when services are provided by Airport Authority of India (AAI).Analysis:The judgment deals with the issue of whether a licensee can be held liable for service tax payment when the services provided should be attributed to the Airport Authority of India (AAI). The appellant argued that they acted as an agent, merely collecting fees for services rendered by AAI. The license agreement between AAI and the appellant entrusted the appellant with collecting airport admission ticket charges at Karipur Airport, Calicut. The agreement required the appellant to pay a monthly license fee and collect charges from visitors. The appellant contended that AAI, as the principal service provider, should be responsible for service tax payment.The legal analysis delves into the terms of the license agreement, emphasizing that the appellant was granted a license by AAI to provide services at the airport, including collecting charges from visitors. The agreement specified that the appellant should pay all applicable taxes and bear expenses for providing services, while AAI provided only the space. The judgment referenced relevant sections of the Finance Act, 1994, defining taxable services provided by AAI or authorized persons in airports or civil enclaves.The Central Board of Excise and Customs issued a circular clarifying that services provided at airports by AAI or authorized persons are taxable. When the appellant received a show cause notice for service tax payment, they argued that AAI should be responsible for tax collection as the principal service provider. However, the adjudicating authority confirmed the tax demand, leading to appeals and subsequent legal proceedings.The Customs Excise & Service Tax Appellate Tribunal (CESTAT) initially ruled in favor of the appellant, considering them as a collecting agent with tax liability resting on AAI. The High Court reversed this decision, directing verification of AAI's tax payments. The Supreme Court upheld the tax liability on the appellant based on the license agreement terms and statutory definitions. The appellant, acting as an authorized person under the agreement, was deemed liable for service tax payment, dismissing the appeal without costs.