TaxTMI 
TaxTMI 
2010 (4) TMI 700
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....lows : M/s. Cochin International Airport Ltd., (CIAL for short) Nedumbassery, Angamaly are providers of various categories of services to the Air Passengers and are duly registered with the Central Excise. Department under Certificate Nos. (1) SWS/ANG-11-1-2002, (2) CHS/ANG- 11-1-2002, (3) TO/ANG-11-3-2004 and (4) AS/ANG-11-1-2004 in relation to services such as Storage & Warehousing, Cargo Handling, Tour Operator and Airport Service respectively and are paying Service Tax at the appropriate rate and are also filing the ST-3 Returns for the respective periods in time. Of the above 4 categories of services, the Airport services were brought into Service Tax net with effect from 10-9-2004 vide Finance (No. 2 ) Act 2004. Under clause 105(zzm) of the Finance Act 1994 as amended "taxable service" in respect of the "Airport Services" has been defined as "any service provided to any person by airport authority or any person authorized by it, in an Airport or a Civil enclave". Under Section 67 of the Finance Act 1994 as amended, the value of any taxable service shall be the gross amount charged by the service provider for such service rendered by him. 2.1 On verification of the fina....
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....a 2 (A to G), for the purpose of arriving at the taxable value of the service provided by them for payment of service tax, coming to such conclusion various show cause notices were issued. 3. The lower authorities have confirmed the demand and upheld the imposition of penalties and the interest demanded on the appellants (as indicated herein above). Aggrieved by such orders, the appellants are before us. 4. The learned Chartered Accountant appearing on behalf of the appellants would submit that the service tax liability under the airport services does not arise in their case. He would submit as under : 4.1 It is submitted that the appellant is not liable to tax under airport services : (a) It is submitted that Section 64(3) of the Finance Act, 1994 provides that Chapter V relating to Service Tax shall apply to taxable services provided on or after commencement of that chapter Sections 66 and 68 are the charging section levying service tax on every person providing taxable service to any person as specifies in Section 66. Statutory liability to pay service tax is imposed on a person providing taxable service to any other person only. To attract ....
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....irport. (Para 20 of the order - page .... of the paper book) (g) It is submitted that merely because Airport Authority of India Act, 1994 is applicable to private airports it cannot be inferred that the service rendered is a taxable service. It is submitted that that the appellant is the owner of the airport and not a person having the charge of the management of airports or a civil enclave and therefore not covered by the definition in section in Section 65(3d) of Finance Act 1994 which is independent of the Airport Authority of India Act, 1994. (h) In this connection reference is invited to Section 38 of the Airport Authority of India Act, 1994 which relates to entrustment of management of airport to any agency. Section 38(1) reads as under "If, at any time, the Central Government is of opinion that in the public interest it is necessary or expedient so to do, it may, by order, direct the Authority to entrust the administration, management or similar other functions of any airport, heliport airstrip, civil enclave, aeronautical communication station, or any other agency or department of any airport, heliport airstrip civil enclav....
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....are not income liable for levy of service tax as the activity of letting out premises is not rendering a service. (h) It is submitted that in fact it is clear from exclusion of rental/lease charges that the board recognizes the fact that all income received by airport does not fall under the category of airport services . It is clear from the illustrations given- "security, transit facilities, landing charges, terminal navigation charges, parking and housing charges and route navigation facility charges"- that Only those services which are mandatory services or required to be provided by an airport are covered. (i) Alternatively, it is submitted that the Royalty collected is in the nature of a share of product or profit reserved by owner for permitting another to use his property. (j) In Aviat Chemicals (P.) Ltd. v. CCE - 2006 (3) S.T.R. 291 (Tri.-Del.) = 2004 (170) E.L.T. 466 (Tri.-Del.) = [1994-2006] S.T.T. 572 (Delhi - CESTAT), it had been held that -"Payment of royalty in a common parlance is not considered as payment for a service provided. It is understood as a share of product or profit reserved....
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.... coal or other mineral that is or may be taken from a mine. (o) The learned Commissioner has observed that clarification issued by the Finance Ministry in F. No. 80/10/2004 dated 17-9-2004 (actually letter F. No. B2/8/2004 TRU dated 10-9-2004, 80/10/2004 is the circular issued by CBEC reproducing the said letter) clarified that Royalty, licence fee etc. are taxable and has reproduced the clarification in para 23 of the order. (p) It is submitted that even though it is true that circular No. 80/10/2004- ST states that charges such as royalty, license 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, this clarification is beyond the scope of the Act in as much as that to attract service tax some service must be rendered. (q) In Adwise Advertising (P.) Ltd. v. Union of India - 2006 (2) S.T.R. 375 (Mad.) = 2001 (131) E.L.T. 529 (Mad.) = [2007] 6 S.T.T. 358 (Mad.) it has been held that it is a basic principle that the provisions of an Act of the Parliament cannot be altered or contradicted or in any....
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....e facilities (a) Appellant has submitted copy of the agreement with Thomas Cook. (b) It is submitted that the appellant is providing any service to Thomas Cook or receiving any service from them. The relationship between the appellant and Thomas Cook is not one of service provider and service recipient. (c) Following the decisions in Aviat Chemicals (P.) Ltd. v. CCE [1994-2006] STT 572 (Delhi - CESTAT), & CCE v. Pinnacle Industries Ltd. [2006] 3 STT 324 (New Delhi - CESTAT), royalty charged could not be taken as a consideration for any service rendered. (d) It is also submitted that in circular No. 80/10/2004 - ST it is clarified that charges such as royalty, license 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. Apparently these are services that an airport is necessarily duty bound to provide in an airport but other service providers are providing the service. It is submitted that the appellant is not an authorized dealer and cannot deal in foreign exchange. There ....
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....oses. The license fee is fixed on the basis of the area allotted 4.6 License fee on Advertising : (a) The appellant has produced copy of the agreement with M/s. Daffodils Communications. The appellant has granted the advertisement rights to them to put up advertisement in sites on trolleys used in International and Domestic terminal buildings. (b) It is submitted that the observation of the learned commissioner that the "these (advertisement) services are rendered for the facility of passengers, visitors etc." are against the facts. (c) The appellant is not rendering any services to the M/s. Daffodils communications but only providing space for advertisement. It is submitted that the requirements in Section 65(105) - viz Provision of service is not fulfilled. The appellant is not a service provider as required in Section 68. As held in 2006 (2) S.T.R. 228 (Guj.) = 1998 (98) E.L.T. 14 (Guj.) if there is no service there can be no service tax. (d) Kind attention is invited to the following decisions : (i) Commissioner of Central Excise v. Azad Publications - 2....
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....pellant has furnished copy of the agreement with M/s. Fair exports (I) Ltd. and it is clear from the agreement that the charges are for permission to the party for providing storage cum office space and housing services for cargo handling agents in the airport. It is submitted that the licence fee is apparently only rent for use of airport premises. The learned commissioner has observed "since the services provided by the party is as per permission granted by the assessee under a licence and the services are in relation to cargo handling provided at the airport premises and as the airport is receiving licence fee in consideration of the above permission." Admittedly, the learned Commissioner has conceded that the consideration is for the permission and not for any service rendered to the party. The learned Commissioner also admits that it is not the appellant that is rendering services. It is submitted that merely because the party is using the rented premises for rendering a taxable service, the owner cannot be held liable. 4.8 License fee for Car park The appellant has furnished copy of the agreement with Shri Baby Paul. It is clear from the agreement that appellant has permi....
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....centage of monthly bill, it cannot be held to be a taxable service. 4.14 License fee Vending machine : It is submitted that the contractor is permitted to set up vending machines in the airport. No service is rendered by the appellant, thus the licence fee is only rent for use of airport premises. 4.15 License fee Catering services : It is submitted that the contractor is permitted to provide catering within the airport premises. No service is rendered by the appellant to the party, the licence fee is only rent for use of airport premises. 19. License fee Facilitation counter : No service is rendered by the appellant from the person from whom fee is collected, the licence fee is only rent for use of airport premises. 4.16 Income from entry ticket charges : It is submitted that entry ticket charges is collected from non passengers for permission to entering into certain restricted areas. Fee is not levied for any services provided to them. The purpose levy of the entry fee is to restrict entry of public into the restricted areas in terminals and other places and hence these are not income for services provided coming under Taxable services. 4.17 Income from guest room : It....
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.... (b) It is submitted that following the decisions in the Hon'ble High Court of Patna in Ranchi Club v. CIT (217 ITR 72), Hon'ble Supreme Court in J.K. Synthetics Ltd. v. Commercial Taxes Officer (1994) 4 S.C.C. 276); (1994) (94 STC 0422) no interest can be levied on the additional amount which is not an admitted tax. (c) It is submitted that in Star India (P) Ltd. v. CCE - 2006 (1) S.T.R. 73 (S.C.) = (2005) 2 STT 274 (S.C.) it was held that liability to pay interest would arise only on default and is really in the nature of a quasi - punishment. 4.22 Penalty u/s 76 (Penalty for failure to collect or pay Service Tax) (a) It is submitted that this is not a case where there is absolute failure to collect & pay tax. Service tax has been paid on the services which are included in the return. It is submitted that whether service tax is to be remitted on the royalty received from licence fee & other income are debatable issues. The Appellant is not providing any service to the parties. The amounts are in the nature of rent and can be excluded in view of circular No. 80/10/2004. (b) It is s....
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....lants as the entire amount of cess as recovered and indicated in the balance sheet as income is nothing but lease/rental charges. 6. He would draw our attention specifically to the CBE Circular 80/10/2004 dated 17-9-2004. It is also his further submission that the appellants have handed over the contract to perform entire ground handling service to M/s. Air India and M/s. Air India vide their certificate dated 28-1-2008 has clearly certified that they are discharging service tax liability on the services rendered by them. 7. Learned JCDR on the other hand would submit that services rendered by the appellants would fall under the category of Air Port Services. It is her submission that the agreement entered by the appellant with M/s. Air India, Thomas Cook, Atlas Jewellery and Bharat Petroleum would clearly indicate that the services which are to be rendered by the appellant are being rendered by somebodyelse. It is her submission that the said services even if rendered through another agency would fall under the category of services rendered by another person authorized. She would submit that the agreement produced by CIAL clearly indicates that the appellants are charg....
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....nbsp; from telephone operators (9) vending machine (10) catering services (11) facilitation counter 8.1 We now take up the issue of service tax liability on the royalty charges collected by the appellants from M/s. Air India for the services rendered by M/s. Air India at the Cochin International Airport. We have perused the agreement entered by the appellant with M/s. Air India. As per the said agreement we find that Air India has been given exclusive contract to perform ground handling services including passengers handling, ramp handling and cargo flight handling including loading of cargo etc. The appellant is required to provide facilities like runway for landing and takeoff, Security Services Passenger facilities etc. It is also seen that M/s. Air India is collecting service tax from various Airlines and are discharging service tax liability on such amounts collected by them for the services rendered by M/s. Air India. It is abundantly clear from the certificate dated 28th January 2008 issued by M/s. Air India which is reproduced herein below verbatim. "DF/BS/CIAL/001 Date 28th January 2008 - C....
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....s been given to them for construction/fabrication of tanks wherein the aviation fuel is stored. In our considered view, the said agreement could clearly be classified as an agreement for lease or rent. On perusal of the agreement between the appellant and Thomas Cook Ltd., we find that the said agreement is for operation of foreign exchange counters within the airport enclave. It is seen that as a consideration for the licence granted, the said Thomas Cook pays a fixed amount of Rs. 5000/- as license fee and a further amount as percentage on gross foreign exchange turn over recorded by them in the Airport. It is also seen that this licence is for a specified period. From the agreement, it is seen that all the licensees are required to pay municipal rates and taxes and other statutory levies by the State or any other Authority under the law. This would indicate that the licensees i.e. M/s. Thomas Cook, Atlas Jewellery etc., have taken the area on lease and as per the CBEC Circular dated 17-9-2009, such charges would not be subject to service tax as the activity of letting out premises is not rendering services. 9.2 On perusal of the records, we find that the licence fee charge....