2013 (3) TMI 81 - HC - Service Tax

Levy of service tax on AAI - airport or a civil enclave - since service tax was demanded by the Service Tax Authorities from the respondent AAI, the respondent AAI in turn raised demand on the petitioners and which has resulted in filing of these petitions - held that - since the petitioners as well as the respondent AAI, both are challenging the very leviability of service tax on the subject transaction and further since the appeal against the order levying the service tax is pending consideration and in adjudication of which appeal, the questions as raised herein will necessarily have to be decided, and yet further since the said appellate fora is the appropriate fora to decide the said questions, it is not necessary for the same to be decided by us.

Summary

Issues:
1. Applicability of service tax under Clause (zzm) of Section 65(105) of the Finance Act, 1994.
2. Dispute over the liability of service tax between petitioners and respondent AAI.
3. Intervention of petitioners in the pending appeal proceedings.
4. Arbitration clause in agreements between petitioners and respondent AAI.
5. Interim arrangements regarding recovered service tax, security deposits, and outstanding demands.

Analysis:

Issue 1: Applicability of service tax under Clause (zzm)
The genesis of the petitions lies in the insertion of Clause (zzm) in Section 65(105) of the Finance Act, 1994, which defines taxable services provided by airports or other persons within airports. The Service Tax Authorities demanded service tax from the respondent AAI based on agreements with the petitioners, leading to disputes over the applicability of service tax. The petitioners argue that no service is rendered at the airport, challenging the levy rather than the vires of the statutory provision.

Issue 2: Dispute over liability of service tax
Both petitioners and the respondent AAI contest the leviability of service tax on their transactions. The Commissioner, Service Tax held the respondent AAI liable, prompting the respondent AAI to demand payment from the petitioners. However, the appellate fora are deemed appropriate to decide the questions raised, as the appeal against the service tax order is pending adjudication.

Issue 3: Intervention in appeal proceedings
The petitioners sought to intervene in the pending appeal against the service tax order. The respondent AAI and the Service Tax Authorities did not object to the petitioners' participation in the appeal proceedings. The court directed each petitioner to join the appeal proceedings and be heard, ensuring they receive necessary information for their involvement.

Issue 4: Arbitration clause in agreements
The agreements between the petitioners and the respondent AAI contain arbitration clauses to resolve disputes. The court directed the parties to seek interim measures in arbitration proceedings if service tax is ultimately levied. The liability for service tax payment and arbitration proceedings vary based on the specific agreements in place.

Issue 5: Interim arrangements
The court addressed interim arrangements concerning recovered service tax, security deposits, and outstanding demands in a tabular form for each case. It outlined specific directives for cases where service tax was paid, security deposits were held, or demands were outstanding, ensuring the parties' interests were safeguarded until final determinations were made.

In conclusion, the court disposed of the petitions with directions for arbitration, intervention in appeal proceedings, and interim arrangements, emphasizing the importance of resolving the disputes over service tax applicability and liability through appropriate legal channels.