2023 (4) TMI 613 - SC - Service Tax

Duty Free Shops at Airports Exempt from Service Tax on Property Rent, Says Tribunal; Tax Imposition Ruled Unconstitutional.

COMMISSIONER OF CGST AND CENTRAL EXCISE MUMBAI EAST Versus FLEMINGO TRAVEL RETAIL LTD

The CESTAT ruled in favor of the respondent, operating Duty Free Shops at international airports, granting a refund of service tax paid to Mumbai ... Refund/rebate of service tax - payment of service tax on the renting of immovable property of the concerned Duty Free Shops - HELD THAT:- In Aatish Altaf Tinwala [2019 (5) TMI 1802 - SC ORDER] and [2018 (12) TMI 1278 - BOMBAY HIGH COURT], 'It was held that the Duty Free Shops in international arrival or departure terminals shall be deemed to be the area beyond the customs frontiers of India.' - as affirmed by this Court [2018 (12) TMI 1971 - SC ORDER] Duty Free Shops, whether in the arrival or departure terminals, being outside the customs frontiers of India, cannot be saddled with any indirect tax burden and any such levy would be unconstitutional. Therefore, if any tax is levied, the same cannot be retained and the Duty Free Shops would be entitled for refund of the same without raising any technical objection including that of limitation. In the end, learned counsel appearing for the appellant made a passing reference to two pending appeals which according to him raises an identical issue and thus, a request was made to tag this appeal along with the pending appeals. Appeal dismissed. Issues:The issues involved in the judgment are the claim for refund of service tax in relation to transactions with Mumbai International Airport, the applicability of service tax on renting of immovable property, and the jurisdiction of Duty Free Shops at international airports in relation to customs frontiers.Claim for Refund of Service Tax:The respondent, engaged in running Duty Free Shops at international airports, filed a claim for refund of service tax paid to Mumbai International Airport. The original adjudicating authority rejected the refund claims, stating that the service tax on renting of immovable property was rightly levied and not liable to be refunded. The Commissioner of Appeals also dismissed the appeal. However, the CESTAT allowed the appeal, concluding that Duty Free Shops at international airports operate in a tax exempt environment and the levy of service tax is without lawful authority. The Tribunal relied on legal precedents to support its decision.Applicability of Service Tax on Renting of Immovable Property:The Tribunal considered the legal fiction that transactions outside customs frontiers of India are deemed to have taken place outside India. It referenced a judgment regarding the location of Duty Free Shops at international airports in relation to customs frontiers. The Tribunal held that Duty Free Shops are beyond the customs frontiers of India and cannot be burdened with any indirect tax, deeming any such levy as unconstitutional. Therefore, Duty Free Shops are entitled to a refund of any tax levied without raising technical objections.Jurisdiction of Duty Free Shops at International Airports:The judgment referenced decisions by the Central Government and various High Courts affirming that Duty Free Shops in international arrival or departure terminals are considered to be beyond the customs frontiers of India. The courts held that such shops are not within Indian territory for the purpose of levy and collection of customs duties. The judgment emphasized that any tax levied on Duty Free Shops would be unconstitutional due to their location outside the customs frontiers of India. The court dismissed the appeal, aligning with the legal position established by previous judgments and constitutional provisions.Separate Judgement:No separate judgment was delivered by the judges in this case.