2010 (4) TMI 700 - AT - Service Tax

Port Services - Royalty charges - Licence fees - Held that - the demand of service tax on the royalty charges collected by appellants from M/s. Air India can be construed as an amount for lease or rental charges for functioning in the appellant s area. - the service tax liability on amounts collected from M/s. Air India in any from would not arise. Allocation of space and charging royalty - 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. Licence fee charged by the appellant on advertising, cargo agency, car parking, space, shops, restaurant/snack bar, telephone operator, vending machines, catering services facilitation counter - these charges cannot be considered as the charges which have been collected by the appellant from other service providers for services rendered definitely with the airport services. - Not chargeable to service tax Income from guest room, courtesy coach parking and surcharge on prepaid taxi - these charges are liable to service tax. Income from entry ticket charges and income from issue of commercial passes - these charges are charged by the appellant for restricting the entry to public in to the Airport. The said income is not in respect of any services rendered by the appellant as an Airport Authority. - this amount collected and shown as income could not be construed as services rendered and liable to service tax.

Issues Involved:
1. Service tax liability on royalty charges collected from various entities.
2. Service tax liability on license fees collected for various services and spaces.
3. Interest on delayed payment of Service Tax.
4. Penalty for failure to collect or pay Service Tax.

Detailed Analysis:

1. Service Tax Liability on Royalty Charges
Royalty Charges from M/s. Air India for Ground Handling:
- The agreement with Air India grants them exclusive rights for ground handling services at Cochin International Airport. Air India collects service tax from various airlines and remits it to the Service Tax Department.
- The Tribunal found that since Air India is discharging the service tax liability on the gross amount collected, the royalty charges paid to Cochin International Airport Ltd. (CIAL) are essentially lease or rental charges and not subject to additional service tax.

Royalty Charges from M/s. Thomas Cook for Exchange Facilities:
- The agreement with Thomas Cook allows them to operate foreign exchange counters within the airport. The charges include a fixed license fee and a percentage of gross foreign exchange turnover.
- The Tribunal held that these charges are for leasing space and, as per CBEC Circular dated 17-9-2004, such charges are not subject to service tax.

Royalty Charges from M/s. Atlas Jewellery for Duty-Free Gold Sale:
- The agreement with Atlas Jewellery is for space allotted within the airport. The Tribunal concluded that these charges are for leasing space and not for services rendered, thus not subject to service tax.

2. Service Tax Liability on License Fees
License Fees on Advertising, Cargo Agents Building, Car Park, Space, Shops, Garbage Disposal, Restaurant/Snack Bar, Telephone Operators, Vending Machines, Catering Services, Facilitation Counter:
- The Tribunal found that these fees are for leasing or renting space within the airport. The agreements indicate that the charges are for the use of space rather than for services rendered. Therefore, these charges are not subject to service tax.

Income from Entry Ticket Charges and Issue of Commercial Pass:
- These charges are for restricting public entry into the airport and are not for services rendered. The Tribunal ruled that these are not subject to service tax.

Income from Guest Room, Courtesy Coach Parking, and Surcharge on Prepaid Taxi:
- The Tribunal held that these activities are services rendered by the appellant and are subject to service tax. Guest rooms are provided to passengers, courtesy coach parking services are for coaches bringing passengers to the airport, and surcharge on prepaid taxis is an additional charge collected from taxi operators.

3. Interest on Delayed Payment of Service Tax (Section 75)
- The Tribunal noted that interest is not applicable as the tax due as per the return has been remitted. The Tribunal referenced decisions from higher courts indicating that interest cannot be levied on additional amounts not admitted as tax.

4. Penalty for Failure to Collect or Pay Service Tax (Section 76)
- The Tribunal acknowledged that the appellant had paid service tax on the services included in the return. The issues of royalty and license fees were debatable, and penalties should not be imposed for bona fide belief or technical breaches. The Tribunal referenced several decisions indicating that mens rea is essential for imposing penalties.

Conclusion:
The Tribunal remanded the matter to the lower authorities for re-quantification of the service tax liability based on the findings. The lower authorities are to decide the correct quantum of service tax, interest, and penalties. The appeals were disposed of accordingly.

(Pronounced in open Court on 1-4-2010)

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