2015 (1) TMI 1049 - AT - Service Tax

Airport services - Intrepretation of term any service provided - whether the term any service provided covers only the taxable services or it covers any service provided by AAI or person authorized by it in the Airport/ civil enclaves, or its scope is limited to the services with the AAI is expected to provide under Section 12 of the Airports Authority of India Act; - what is the meaning of provided in the Airport or Civil Enclave and whether a service transaction is involved in renting of immovable property for business or commerce and in concession/licensing agreements. - Provisional assessment - Penalty u/s 76, 77 & 78 - Invocation of extended period of limitation Held that - since in section 65(105)(zzm) the words any service provided are qualified only by two conditions - (a) The service should have been provided by Airports Authority of India or by a person authorised by it; and (b) The service should have been provided in the Airport/Civil Enclave; It would not be correct to add the words taxable before the words service . If the words any service provided in clause(zzm) of Section 65(105) are interpreted as any taxable service provided , this clause would become redundant, as it would cover only those services which are covered by other clauses of section 65(105). An interpretation of a statutory provision, which renders the same redundant is not a correct interpretation and has to be avoided. Moreover Hon ble Bombay High Court in case of Indian National Shipowers Associates Vs. Union of India reported in 2009 (14) STR-289 (Bom.), has held that the introduction of a new entry and inclusion of certain services in that entry presupposes that there were no earlier entry covering such services. If the words any service provided used in section 65(105)(zzm) is read as any taxable service provided , it will result in the clause (zzm) becoming redundant. Therefore there would be no justification for adding the word taxable to any Service provided , which would make this clause a redundant provision. In fact, section 65(105) of the Finance Act, 1994, which defines the term taxable service has evolved since 1994 by addition of new clauses to bring more and more services within the definition of taxable service . While the expression any service provided or to be provided is common to all the clauses, the words following this expression specify the nature of the service. In clause (zzm), the qualifying words are by Airport s Authority or any person authorised by it, in an Airport or a Civil Enclave . It is inconceivable that a new clause added to section 65(105)(zzm) would not cover any new service but would cover only the services while are already taxable i.e. are covered by other clauses of section 65(105) introduced earlier. Therefore the words any service provided in clause (zzm) of section 65(105) would cover any service other than those covered by other clauses of section 65(105)(zzm), which have been provided in an Airport or a Civil Enclave by AAI or a person authorised by it. Revenue from passenger service fee is accounted as Traffic Revenue. Since the general maintenance of the Airports/Civil Enclaves, providing various facilities to the passengers using the Airports/Civil Enclaves and also arranging for the security to the passengers using the Airports/Civil Enclaves is a service which the AAI is required to provide and since the service has been provided by the Appellant (AAI) within the Airports/Civil Enclaves, the same satisfies the criteria prescribed in Section 65(105)(zzm) and would attract service tax under this clause. Though in the Representation to the Committee on disputes of the Central Government, the appellant s stand was that this service is not taxable and the Appellant had been allowed to contest the issue of taxability of this service before the Tribunal, neither the impugned order nor the submissions made by the appellant mention the total amount of the Revenue earned by the appellant from the passenger service fee. Therefore, for quantification of the service tax on passenger service fee, the matter would have to be remanded, to the commissioner. Whether the letting out of the space inside the Airports/Civil Enclaves to various Airlines and other business establishments for their business activities inside an Airport Civil Enclaves is a service or not - Held that - Circular No. 18/10/04-ST dt.17.09.04 of the Board states that no service tax under section 65(105)(zzm) would be chargeable on the rental/lease charges received by the AAI for rental of part of the premises of an Airport/Civil Enclave, as the activity letting out premises is not rendering of service . This Circular of the Board stating that letting out of premises is not rendering of service becomes contrary to provisions of law, in view of judgment of Hon ble Delhi High Court in Case Home Solutions Retails (India) Pvt. Ltd. (Supra) and, therefore, the judgments of various High Courts which are either based on this Circular of the Board or are based on the concession made by the Government counsels on the basis of the Board s Circular, would not be binding precedents. In view of this, we hold that renting/leasing of space inside the Airports/Civil Enclaves by the appellant to various persons for their business activity is a service and since the same has been provided by AAI inside the Airports/Civil Enclaves, and has nexus with passenger facilitation, it would be covered by Section 65(105)(zzm) and would be taxable. Whether fixed amount received by the appellant as license fee/royalty from the concessionaries/licensees operating, car parking facility, managing visitors entry into the Airports/ Civil Enclaves and issue of season tickets and temporary passes would attract service tax or not - Held that - Appellant cannot be treated as service provider in respect of managing car parking, visitor s entry into Airports/Civil Enclaves and issue of temporary passes/season tickets, as it is the persons licensed by the Appellant who have stepped into the shoes of the Appellant and are providing these services, who would be liable to pay service tax on the amount being received by them from the users of these services. The Appellant in terms of the provisions of Airports Authority of India Act, 1994 being the only person responsible for management of all the Airports and Civil Enclaves in India are responsible for providing various services at the Airports/Civil Enclaves to Airlines, passengers and other persons associated with transportation of goods and persons by Air and operation of Airports/Civil Enclaves. Some of the services - parking facility for visitors, providing the visitors access to Airports/Civil Enclaves and issue of seasons tickets/passes are provided against payment though sale of tickets/passes. Provision of these services by the Appellant (AAI) represents a business which has a stream of revenue. Because of restriction put by law, only the AAI or the persons authorised by AAI can provide these services in the Airports/Civil Enclaves, as a result of which there is a premium on this business. When instead of the Appellant operating these businesses at the Airports/Civil Enclaves, they authorise other persons to operate these business and provide these services under licence/concession agreements under which the Appellant receive fixed amounts from the licensees/ concessionaires for a specified period against licence/ permission to them to operate these businesses and sell the tickets/passes during that period the Appellant have rented the business, in question, to the licensees/concessionaires. The lump sum amount/ licence fee charged by the Appellant from licensees/Concessionaires is in the nature of royalty. There is no difference between the activity of the Appellant (who by virtue of the provisions of Airports Authority of India Act, 1994 have exclusive right to manage all Airports/ Civil enclaves in India) of permitting other persons to operate and manage certain services in the Airports/ Civil enclaves like parking facility to visitors, visitor s access to Airport/ civil enclave etc. for some consideration under licence/ concessionaire agreements and the activity of a person, who owns some property, tangible or intangible, of permitting the use of that property by other persons for some consideration; in both the cases, the activities are services. Car parking areas - Held that - Since this activity is a service which has been provided by AAI in the Airports/Civil Enclaves, and the same has nexus with the operation and management of Airport/ civil enclaves the same would be taxable under Section 65(105)(zzm). In this regard, Appellant s plea that car parking areas are outside the Airports/Civil Enclaves is not acceptable as these areas/structures are the areas/structures appertaining to the Airports/Civil Enclaves as the same are connected with the functioning of Airports/Civil Enclaves. Letting out space at the Airports/Civil Enclaves for display of Hoardings etc. - Held that - Reasons given by the Commissioner for dropping the service tax demand in respect of Revenue earned by the appellant from the letting out space at the Airports/Civil Enclaves for display of Hoardings etc. are wrong. Even if this is treated as service of sale of space for advertisement, which as such was not taxable during the period of dispute and become taxable w.e.f. 01.05.06 - Even if this is treated as letting out of space inside the Airports/Civil Enclaves to advertising agencies etc. for putting up Hoardings for Advertisement, even then it will be an activity of letting out of immovable property in the Airports/Civil Enclaves for Commercial purposes and as discussed above, the same has to be treated as service and would be taxable under section 65 (105)(zzm) as same has been provided by AAI in the Airports/Civil Enclaves. - Therefore, the Commissioner s Order dropping the service tax demand of about ₹ 7.05 Crores on the Revenue received by the Appellant from letting out of space at Airports/Civil Enclaves for display of Hoardings etc. is not correct and has to be set aside and service tax demand on this amount has to be confirmed. Service Tax of ₹ 56,74,775/- has been demanded on an amount of ₹ 9,37,21,598/- received by the appellant as miscellaneous income. According to the appellant, this income is from unclaimed earnest money deposit/security deposit, liquidated damage, sale of tender forms, sale of scrap etc. which have nothing to do with provision of service. In our view, if this contention of the appellant is correct, service tax demand on this amount would not be sustainable. However, the impugned order does not discuss the Appellant s plea in respect of miscellaneous income. In view of this, the demand of service tax on the miscellaneous income has to be set aside and matter would has to be remanded to the Commissioner for de-novo adjudication after considering the Appellant s plea in respect of the same. Extended period of limitation - Held that - The limitation period under Section 73(1) would be in-applicable only for the period for which provisional assessments had been ordered under Rule 6(4) of the Service Tax Rules, 1994 i.e. for period from March 05 to Sept 05. While the demand for period from Oct 05 to March 06 is within normal limitation period, the demand for period from 10.09.04 to Feb. 05 would survive only if the assessments for this period were provisional. Though the commissioner in the impugned order has confirmed the demand for period from 10.09.04 to 30.09.05 by finalising the provisional assessments for this period, in para 70 of the order, he has given a finding that assessments for period from Sept. 04 to Feb. 05 were not be considered as provisional. - Matter remanded back in respect of provisional assessment - The demand for the remaining period i.e. from March 05 to 31.03.06 is not hit by limitation. This is a fit case for invoking Section 80 according to which notwithstanding anything contained in Section 76, 77 & 78, no penalty shall be imposable on an assessee for any failure referred to in the said provisions if the assessee prove that there was reasonable cause for the said failure. - invoking Section 80, the penalty under Section 76 and Section 77 has to be set aside. - Following decisions of Flammingo Dutyfree Shops Pvt. Ltd. Vs. Union of India reported in 2013 (1) TMI 523 - DELHI HIGH COURT - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Taxability of services provided by the Airport Authority of India (AAI) under Section 65(105)(zzm) of the Finance Act, 1994.
2. Classification of various revenue streams of AAI as taxable services.
3. Applicability of service tax on Route Navigation Facility Charges (RNFC) and Terminal Navigation Landing Charges (TNLC).
4. Taxability of non-traffic revenue such as rental/lease charges, public admission fees, car parking, left luggage facilities, retiring rooms, and miscellaneous income.
5. Interpretation of "any service provided" and "provided in an airport or a civil enclave".
6. Applicability of extended period of limitation under Section 73(1) of the Finance Act, 1994.
7. Imposition of penalties under Sections 76 and 77 of the Finance Act, 1994.

Detailed Analysis:

1. Taxability of Services Provided by AAI:
The Tribunal held that the expression "any service provided" in Section 65(105)(zzm) covers all services provided by AAI or its authorized persons in an airport or civil enclave. It includes services related to maintenance, navigational aids, passenger facilities, safety services, and commercial activities within the airport premises. The Tribunal rejected the appellant's contention that only taxable services are covered, stating that adding the word "taxable" would render the clause redundant.

2. Classification of Various Revenue Streams:
The Tribunal classified the revenue streams of AAI into traffic and non-traffic revenue. Traffic revenue includes landing fees, parking charges, RNFC, TNLC, and passenger service fees. Non-traffic revenue includes rental/lease charges, public admission fees, car parking, left luggage facilities, retiring rooms, and miscellaneous income. The Tribunal held that both traffic and non-traffic revenues are taxable under Section 65(105)(zzm) as they are services provided within the airport premises.

3. Applicability of Service Tax on RNFC and TNLC:
The Tribunal remanded the issue of RNFC and TNLC to the Commissioner for de-novo adjudication. It directed the Commissioner to ascertain whether these services are provided entirely by persons deployed within the airport premises. If the services involve persons or equipment located outside the airport, they cannot be treated as provided within the airport and would not be taxable under Section 65(105)(zzm).

4. Taxability of Non-Traffic Revenue:
The Tribunal upheld the taxability of non-traffic revenue, including rental/lease charges, public admission fees, car parking, left luggage facilities, retiring rooms, and miscellaneous income. It held that renting/leasing of space for business activities within the airport is a service and taxable under Section 65(105)(zzm). The Tribunal also held that the lump sum amounts received as license fees from concessionaires for managing facilities like car parking and public admission are taxable as they represent economic rent and value addition.

5. Interpretation of "Any Service Provided" and "Provided in an Airport or a Civil Enclave":
The Tribunal held that the term "any service provided" includes all services provided by AAI or authorized persons within the airport premises. The term "provided in an airport or a civil enclave" includes services performed within the airport area or related to immovable property within the airport. The Tribunal emphasized that the services must have a nexus with the smooth, efficient, and commercial operation of the airport.

6. Applicability of Extended Period of Limitation:
The Tribunal held that the extended period of limitation under Section 73(1) is not invokable as there was no fraud, suppression of facts, or willful misstatement by AAI. The Tribunal remanded the issue to the Commissioner to ascertain whether the assessments for the period from 10.09.04 to Feb. 05 were provisional. If not, the demand for this period would be hit by the normal limitation period.

7. Imposition of Penalties:
The Tribunal set aside the penalties imposed under Sections 76 and 77, invoking Section 80 of the Finance Act, 1994. It held that there was a reasonable cause for AAI's failure to pay the service tax by the due date, as AAI had sought clarification from the Department and requested provisional assessments.

Conclusion:
The Tribunal upheld the taxability of various revenue streams of AAI under Section 65(105)(zzm) and remanded certain issues for de-novo adjudication. It set aside the penalties imposed on AAI and directed the Commissioner to quantify the service tax liability for the normal limitation period or the period for which assessments were provisional. The appeals and miscellaneous applications were disposed of accordingly.