2011 (1) TMI 11 - SC - Service Tax

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

C PAULOSE, M/s SPARKWAY ENTERPRISE Versus CCE

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 ... Services at airport - services being provided by licencee / agent - service tax liability on licencee - Entry fee - Held that: - the appellant is authorized to provide all the services as mentioned therein and, therefore, as per the statutory definition the appellant steps into the shoes of AAI for the service provided on the basis of the authorization and becomes liable to pay such taxes in terms of the operation of Section 65 Clause 105 (zzm) of the Finance Act, 1994. 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.