2013 (1) TMI 523 - HC - Service Tax

Court quashes service tax demand pre-June 2007 on airport rentals, allows appeal participation & arbitration

FLEMINGO DUTY SHOPS PVT. LTD. Versus UNION OF INDIA

The court quashed the demand for service tax before June 1, 2007, on lease rentals and royalties paid to the Airports Authority of India (AAI) for space ... Service tax on the rental/license fee - Payable to Airports Authority of India (AAI) for space rented/licensed in the airport premises for housing of the duty free shop - Circular No. 80/10/2004-S.T., dated 17-9-2004 – Held that:- On the basis of the said circular had held that in so far as letting out of the part of Airport services is concerned, no service tax is payable as per the said circular and accordingly the demand for service tax was quashed till the period prior to 1st June, 2007 Period after 1st June, 2007 is concerned - The stand of the AAI also was that no service tax was payable - AAI had demanded service tax from the petitioners therein merely because the Service Tax Authorities had demanded the same from AAI – Held that:- Service tax is payable for the period from 1st June, 2007 onwards, the inter se dispute shall be resolved by arbitration. Issues:1. Challenge to levy of service tax on lease rental including royalties.2. Applicability of service tax on license fee paid for space rented/licensed in airports.3. Benefit of previous judgment applicable only for period prior to 1st June, 2007.4. Dispute resolution for period after 1st June, 2007 through arbitration.5. Direction for refund of service tax if ultimately found not leviable.Analysis:1. The petition challenged the levy of service tax on lease rental and royalties paid by the petitioner to the Airports Authority of India (AAI) for space rented in airport premises. The respondents were sought to be restrained from demanding or levying service tax on the license fee paid by the petitioner to AAI for space licensed in various airports.2. The Court noted that a similar issue had been addressed in previous cases where AAI had let out premises to petitioners for various purposes, and the Service Tax Department was claiming service tax on the rental/license fee paid by the petitioners to AAI. The petitioners argued that the renting out of immovable property did not constitute a taxable service. A circular issued by the Central Board of Custom and Excise was also referenced in support of this argument.3. The Court referred to a previous order dated 17th July, 2012, where it was held that no service tax was payable for letting out part of airport services based on the circular. However, this benefit was applicable only for cases before 1st June, 2007. Consequently, the demand for service tax for the period before 1st June, 2007 was quashed in the present case.4. For the period after 1st June, 2007, the Court referred to several similar matters where petitioners challenged the levy of service tax. These cases were disposed of by allowing petitioners to join appeal proceedings against the assessment order. The Court directed the resolution of inter se disputes through arbitration if service tax was found payable, with provisions for refund and security arrangements.5. The present petition was disposed of in accordance with the order dated 12th April, 2012, directing the petitioner to participate in the appeal proceedings for the period after 1st June, 2007. The petitioner was required to file an affidavit of undertaking to pay any additional liability towards service tax if ultimately found due. The amount already paid was to remain with AAI for the time being.In conclusion, the judgment addressed the challenges to the levy of service tax on lease rentals and royalties paid to AAI, providing directions for dispute resolution and refund mechanisms based on previous judgments and legal provisions.