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TMI Blog2015 (1) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... e; 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 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 tic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/ 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Appeal No.ST/118/2007-CU[DB], Appeal No.ST/142/2007 - Final Order No. ST/A/50001-50002/2015-CU(DB) - Dated:- 2-1-2015 - G Raghuram (J) and Rakesh Kumar (T) For the Appellant : Shri A K Batra, CA, Shri Suresh Virmani, CA Ms Zahida Shamim, Adv.,Shri V A Rana, Adv. Ms Mrinal, Adv. , Shri Jitender Singh, Adv Ms Anuradha Kapadia, Adv., Ms Geetanjali, CA, Shri N Venkatraman, Sr A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004, cargo handling service including that being provided at the Airports/Civil Enclaves was taxable of Section 65(105)(zv) read with Section 65(23) of the Finance Act, 1994. The dispute in this case is about services being provided at the airports which are other than cargo handling services. In this regard, sometime in Jan'05, the officers of Directorate General of Central Excise Intelligence conducted inquiries with the various officials of AAI. In course of enquiry, Investigating Officers found that other than the Revenue from cargo handling, there are two other streams of revenue for the Airport Authority of India i.e. Traffic Revenue and non-Traffic Revenue. The Traffic Revenue consists of Route Navigation Facility Charges (RNFC), Terminal Navigation Landing Charges (TNLC), aircraft landing fee, Aircraft parking and housing charges and passenger service fee. Non Traffic Revenue earned by the AAI is from Public Admission Fees, Rent and Services, Trading Concession, Car Parking, Left Luggage Facilities, Retiring Room Facility, issue of Season Tickets and Temporary Passes for persons of various contractors, business establishments and concessionaires allowed by the AAI to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.04 to 31.06.06 along with interest and also service tax of about ₹ 53.35 Crores for the period from 10.09.04 to March'06 in respect of non Traffic Revenue received during this period, along with interest. The Show Cause Notice proposed for appropriation of the amount paid by AAI towards their service tax liability and also imposition of penalty on them under section 76, 77 78 of the Finance Act, 1994. 1.5 The above Show Cause Notice was adjudicated by Commissioner vide Order-in-Original No.42/RK/06, dt.15.12.06 by which the Commissioner finalized the provisional assessments and confirmed the service tax demand for the entire period of dispute as made in the Show Cause Notice, except for dropping the demand of about ₹ 7.05 Crore on the amount received for letting out space inside the Airports/Civil Enclaves for display of hoardings/advertisement, along with interest thereon under Section 75. He also imposed penalty of ₹ 1000/- on the Appellant under section 77 for various acts and omissions and penalty under section 76 of ₹ 200/- per day till the date of payment of service tax demand, subject to the total penalty amount not exceeding the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Thus total service tax involved on the disputed non Traffic Revenue of the Appellant is about ₹ 53.35 Crore. 1.9 M/s. Hans Enterprises, M/s. Jet Airways (I) Ltd, M/s. Higginbothams Pvt. Ltd. and M/s. Aero Art Emporium Pvt. Ltd., M/s. P.K. Hospitality and M/s. Garuda Aviation are the persons who have been given certain space in the Airports/Civil Enclaves on lease basis by the appellant (AAI). Since the demand of service tax on the lease amount being received by the AAI from these persons adversely affected them, as the service paid by the AAI would be recovered by AAI from them, all of them moved Hon'ble Delhi High Court for being impleaded as interveners in the appeal filed by the AAI. Accordingly in terms of the orders of Hon'ble Delhi High Court, the miscellaneous applications filed by M/s. Aero Art Emporium, M/s. Jet Airways, M/s. Higginbothams Pvt. Ltd. and M/s. Hans Enterprises were accepted and they have been allowed to be impleaded in these proceedings as interveners. The miscellaneous application for impleadment as interveners, filed by M/s. P. K. Hospitality and M/s. Garuda Aviation are also allowed and they are also allowed to be impleaded in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, during the period prior to this date, which is the period of dispute in this case, no tax would be chargeable on the amount received by the appellant for letting out of any space in the Airports/Civil Enclaves to any person for commercial purpose, that Hon'ble Delhi High Court in case of Flammingo Dutyfree Shops Pvt. Ltd. Vs. Union of India reported in 2012 (28) STR-49 (Delhi) has held that in view of the Board's Circular No.80/10/04-ST dt.17.09.04 clarifying that renting/ leasing of immovable property did not constitute service, for the period prior to 01.06.07, no Service Tax would be chargeable under section 65(105)(zzm) on the lease/rental charges received by the Airport Authority of India from any person for leasing/renting of a part of premises of an Airport/Civil Enclave to him for commercial activity, that same view has been taken by Hon'ble Bombay High Court in case of Sahara Airlines Ltd. Vs. Union of India vide judgment dt. 17.07.12 in respect of Writ Petition No.421/07 and also by Hon'ble Kerala High Court in case of C.C.E. Vs. Cochin international Airport Pvt Ltd., reported in 2011(24) STR-20 (Kar.), that proviso to Section 65(105)(zzm) providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Apex Court's judgment in case of PC Paulose, Sparkway Enterprises Vs. CCE reported in 2011 (21) STR-353 (SC), that service tax demand of ₹ 2,57,84,288/- has been raised on the amount of ₹ 27,85,71,427/- received under the Head Car Parking , that the appellant have granted licence to the successful bidder for managing the facility of Car Parking, for which the appellant charged a lump sum amount (licence fee) from the licensee and it is the licensee who provided the Car Parking Facility to the persons coming to the Airports/Civil Enclaves and collected the Car Parking Fee from them, and therefore for this activity, the service tax cannot be chargeable from the Appellant, that since the area of car parking is not part of the Airport/Civil Enclaves, this service, in any case, is not taxable under section 65(105)(zzm), that similarly the season tickets/ temporary passes to the persons of the contractors, licensees/ concessionaire bup9/; hunyys or business establishments operating in the Airports/ Civil Enclaves with the permission of the Appellant are issued by the licensee from whom the Appellant receive a fixed amount in lieu of transfer of right to him of issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and the penalty under these sections should have been waived by the Commissioner by invoking section 80 of the Finance Act, 1994. 4. Sh. Suresh Virmani, C.A. and Mrs. Zahida Shamim, Advocate, representing M/s. Aero Art Emporium, Sh. V. A. Rana, Advocate Ms. Mrinal, Advocate, representing Jet Airways, Sh. Jitender Singh, Advocate and Ms. Anushree Kapadia, Advocates, representing Higginbothams Pvt. Ltd. and Sh. A. K. Batra, C.A., and Ms. Geetanjali, C.A., representing M/s. Hans Enterprises who were impleded as interveners, pleaded that the Appellant AAI have let out empty space to them in the Airports/Civil Enclaves on which they have set up their Shops/Offices to do their business, that they pay a fixed amount of rent to the Appellant for the space let out to them, that letting out of space inside the Airports/Civil Enclaves by the Appellant (AAI) is not a service and hence no service tax is attracted on the same, that this had been clarified by the Board in its Circular No. 80/10/04-ST dt. 17.09.04 wherein it had been stated in very clear terms that in case, a part of an Airport/Civil Enclave premises is rented/leased out, the rental/lease charges would not be subjected to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the amounts received by the appellant from renting/leasing of the space in the Airports/Civil Enclaves to various persons for Commercial activities, that in respect of other facilities like the facility provided to visitors for access to Airports/Civil Enclaves, managing Car Parking for visitors and other persons, and issue of temporary passes/seasons tickets to the persons of contractors/concessionaires/ business establishments operating inside the Airports/ Civil Enclaves with the permission of the Appellant, which are operated through concessionaires/licensees, service tax would be chargeable from the Appellant on the Revenue earned by the Appellant from these activities, as these services have been provided by the licensees/concessionaires in Airports/Civil Enclaves on behalf of the Appellant, that in this regard he relies upon the Tribunal's Judgment in case of P. C. Paulose Vs. CCE Cochin reported in 2008 (10) STR-335 (Tri Bang.) wherein it was held that even when the contract authorised M/s. P.C. Paulose to collect airport entrance fee from the visitors, it is the Airport Authority who is the actual service provider and is liable to pay the service tax, that in any ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority of India or a person authorised by it, in an Airport/Civil Enclave is a taxable service and this service can be any service, whether taxable or non taxable. He, therefore, pleaded that the portion of the order dropping, the service tax demand on the amount received for letting out of space inside the Airports/Civil Enclaves for display of hoardings/advertisement, is not correct and on this point, the Revenue's appeal may be allowed by confirming the service tax demand. 5.2 He also pleaded that in the circumstance of the case, penalty has been correctly imposed on the Appellant under section 76 and 77 of the Finance Act, 1994. 6. Sh. A.K. Batra, C.A, learned counsel for the Appellant, in rejoinder, pleaded that the Tribunal's judgment in case of P.C. Paulose Vs. CCE Cochin reported in 2008 (10) STR-335 Tri (Br.)cited by the learned D.R. stands reversed by the Apex Court's judgment dt. 13.01.2011 in case of P.C. Paulose, Sparkway Enterprises Vs. CCE reported in 2011 (21) STR-355 (SC) wherein Apex Court has held that the appellant P.C. Paulose, and M/s. Sparkway Enterprises being a person authorised by Airport Authority of India to provide service in exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act, 2012) Section 65B, an interpretations provision is introduced. This provision defines various expressions. Clause 44 defines service and sets out an exclusionary clause. - It is only under Section 65B(44) that service is defined to include a declared service (enumerated in Section 66E). - If any service , in Section 65(105) (zzm) includes services not elsewhere defined and enumerated as taxable services; and if Section 65B(44) is inapplicable prior to 01.07.2012, how is a transaction to be identified as a taxable service under this provision? (6). Section 121 and Clause (55) of Section 65B, provide that words and expressions used but not defined in this Chapter (Chapter-V) and defined in the 1944 Act or the rules made thereunder, shall apply so far as may be in relation to service tax as they apply in relation to excise duty, Section 65B(55) is operative only w.e.f 01.07.2012. - In the light of Section 65(121), whether services (illustrative) such as commercial or industrial construction (25b); construction of complex (30a); sale of space or time for advertisement (zzm); renting of immovable property (zzzz) and work cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng feature is that in section 65(105)(zn) and section 65(105)(zzl) service were also qualified by the definition of Port Service / other port service under section 65(67) which provided that the port service meant any service rendered by a port or any person authorised by the port in any manner in relation to vessel or goods . In absence of provision similar to 65(67) in the definition of Airport Service, the scope of Section 65(105)(zzm) would be confined to the services in relation to Airport which the Airport Authority of India is supposed to provide in terms of Section 12 of the Airport Authority of India Act and the services which are normally understood to mean Airport Services. (ii) One of the canons of taxation is uniqueness of the levy which also encompasses uniqueness of classification of either the goods or service being taxed. In other words, if a taxing statue does not guarantee uniqueness of the levy of a particular service, then it would lead to chaos with a scope for incorrect interpretation and such a taxing statute would be liable to be struck down as vague. Literal meaning of section 65(105)(zzm) would lead to chaos that the levy is vague since it seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 65A shall not apply when the service provided is wholly within the Airports/Civil Enclaves. Another change was that the phrase 'any person authorised by it' was substituted by 'any person'. Though, the above amendment w.e.f. 01.07.2010 would lead to situations where exemptions otherwise available to a taxable service in form of abatement or exclusion otherwise provided in the taxable service, would become inapplicable, this anomaly has been corrected to an extent by introduction of specific exemptions by the way of Notification No.31/2010-ST dt. 22.06.2010, 38/2010-ST dt. 26.08.2010; 41/2010-ST dt. 28.06.2010, 42/10-ST dt.28.08.2010; 43/2010-ST dt. 30.06.2010, 10/2011-ST dt. 01.03.2011 and 11/2011-ST dt. 01.03.2011. (vi) With effect from 1.7.2010, any service provided to any person by Airport Authority or any person authorized by it have been replaced by the words and Airport Authority or any other person . By removing the phrase, by any person authorized by it , and replacing the same by the phrase, by any other person , the legislature has covered other persons having some form of permission to render the various services in the airport. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of a transaction as falling into a specific taxable service category, when it may facially may fall into more than one taxable service category? Submission: If overlap exists, as per proviso, the service must go back into Section 65(105)(zzm). (IV) Question: How is a transaction to be identified as a service if all services whether taxable or otherwise, including those not enumerated or defined elsewhere in the Act fall within the scope of the provision? Submission: Only those service that are otherwise required to be provided by the Airport Authority of India in relation to airport services are covered under this definition. These services can be identified with the aid of Section 12 of Airport Authority of India and commercial practice. (V) Question: If any service in Section 65(105)(zzm) includes services elsewhere not defined and enumerated as taxable services and if Section 65B(44) is inapplicable prior to 1.7.2012, then how is a transaction to be identified as a taxable service under this provision? Submission: Only those service that are otherwise required to be provided by the Airport Authority of India in relation to Airport s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onally? Submission: An unbridled reading of the section would lead to chaos as already explained above. Accordingly, there is chance of the Section being struck down as unconstitutional. Only those service that are otherwise required to be provided by the Airport Authority of India in relation to Airport services are covered under this definition. These service can be identified with the aid of Section 12 of Airport Authority of India and commercial practice. (X) If a restrictive interpretation (reading down) is legitimately invited, how is the restriction to be crafted? Submission: Only those service that are otherwise required to be provided by the Airport Authority of India in relation to Airport services are covered under this definition. These services can be identified with the aid of Section 12 of Airport Authority of India and commercial practice. Care must be taken to avoid taxing matters falling within the State List. 8.2 Shri N. Venkataraman, Sr. Advocate, the amicus curiae, made the following submissions:- (1) During the period prior to 1.7.2012, various clauses of Section 65(105) defined the term taxable services and Clause (zzm) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person authorized by it, in an airport/civil enclave to any other person, and that so far as the present case is concerned, all the services in dispute - Aeronautical communication/ navigation services, Passenger facilitation services and also the lease of space inside an Airport/ civil enclave to any person for his business activities, would be covered by the definition of Airport Service. 11. We have considered the submissions from both the sides including interveners and perused the records. The service provided by the AAI or any person authorised by it to any person in an Airport or in a Civil Enclave became taxable by introduction of Sub-Clause (zzm) to Section 65(105) of the Finance Act, 1994 w.e.f. 10.09.2004. Airport Authority means Airport Authority of India constituted under section 3 of the Airport Authority of India Act, 1994. The Airport Authority of India is responsible for management of all the domestic as well as international Airports and Civil Enclaves in India and besides this, it is also responsible for providing navigational services to Aircrafts in Indian airspace during their flight. Before the coming to the specific points of dispute in this case it woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndling and the same mainly consists of:- a. Lease Charges/Rent for space inside Airports/Civil Enclaves leased/rented to various entities for business activity. b. Licence Fee/Royalty c. Public Admission Fee d. Car Parking e. Left Luggage Facility f. Rest Rooms/Retiring Room Facilities g. Supplying Trolley for Courier Services h. Issue of seasonal tickets and temporary passes. 12.3.1 In this category the biggest source of Revenue is rent/lease charges and Licence Fee/Royalty. The source of the rent/Leasing Charges is Rental/ Lease Charges received from various business establishments like:- Duty Free Shops, Book Shops, other shops, Restaurants, money changers, airlines counters etc. which have been given some specified space inside the Airports/Civil Enclaves for setting up and operating their business. These charges are in the nature of rental of immovable property inside the Airports/Civil Enclaves, rented/leased for business/commercial activity. 12.3.2 Public Admission Fee is charged from the visitors who want access to the Airport/Civil Enclave. However, for this purpose instead of the appellant selling the tickets t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal to the Tribunal against the Commissioner's Order by which the service tax had been demanded on all the streams of Revenue earned by the Appellant. This matter was considered by the Committee on dispute which was held on 13.11.2007 and in terms of Minutes of the meeting Circulated under Cabinet Secretarial Letter dt. 21.11.2007, the Appellant were permitted to pursue appeal to CESTAT on penalty as well as levy of service tax on Route Navigation Facilities Charges (RNFC), X-ray baggage inspection System Charges, Passenger Service Fee (PSF), Licensing of space and extension of watch hours. 13.1 Though COD has permitted the appellant to challenge the impugned order passed by the Commissioner only in respect of Route Navigation Facility Charges (RNFC), Passenger Service Fee (PSF), X-ray baggage inspection System Charges, Licensing of space and extension of watch hours, the appellant in the appeal filed by them have challenged the Commissioner's Order, in addition to the above mentioned points, on all other points including the demand of service tax on the Terminal Navigation Landing Charges (TNLC). Though at the time of filing of appeal, Apex Court's judgment in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the Apex Court has held that right conferred under statute could not be given up on the basis of a concession made by any party to the lis. 14. Coming to the points of dispute in this case, during the period of dispute, in terms of Section 65(105)(zzm), the service provided to any person, by Airports Authority or by any other person authorised by it in an Airport or a Civil Enclave was taxable. In terms of Section 65(3d) the 'Airports Authority' means Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 and includes any person incharge of management of an Airport or a Civil Enclave. Under section 65(3c), the term Airport has the meaning assigned to it under section 2(b) of Airports Authority of India Act, 1994 and accordingly the Airport means landing and taking off area for Aircrafts, usually with runways, Aircraft Maintenance and Passenger Facilities and includes Aerodrome as defined under section 2(2) of the Aircraft Act, 1934. In term of section 2(2) of the Aircraft Act, 1934, an Aerodrome means any definite or limited ground or water area intended to be used either wholly or in part, for landing or depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Authority of India Act; (b) what is the meaning of provided in the Airport or Civil Enclave and (c) whether a service transaction is involved in renting of immovable property for business or commerce and in concession/licensing agreements. 16. The contention of the appellant is that the expression any service provided used in section 65(105)(zzm) means only the taxable services i.e. the services, which during the period of dispute, were covered by other clauses of section 65(105) and not the services which were not so covered i.e. were not taxable in terms of various clauses of section 65(105). The appellant in support of this contention rely upon the Board's Circular No.80/10/04-ST dt. 17.09.04 wherein it has been clarified that only the services provided in the Airport by the AAI or persons authorised by it would attract service tax under the entry under section 65(105)(zzm) and that no service tax would be chargeable on rental/lease charges for part of Airport/Civil Enclave premises leased out/rented out as the activity of letting out of premises is not rendering of services. They also rely upon the judgment of Hon'ble Delhi High Court in case of Flamingo Dutyf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the submissions of both the sides and of the learned amicus curiae, on this point, we are of the view 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.), in para 38 of the judgment 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65(105)(zzm), which have been provided in an Airport or a Civil Enclave by AAI or a person authorised by it. 16.6 The question now arises as to whether the words- any service provided in clause (zzm) of Section 65(105) would cover any service other than those defined in other clauses of Section 65(105) irrespective of whether the service has nexus with functions of AAI and whether this clause is vague, as it does not mention the nature of the activity. Though this clause does not mention the nature of the activity, and the service covered by this clause is defined only by two parameters- (a) the service should have been provided by AAI or a person authorised by it to any person; and (b) the service should have been. provided in the Airport/ civil enclave; in our view, the very condition that the service should be provided by AAI or a person authorised by it, would restrict the scope of this clause to only those services, which AAI is expected to provide in the Airports/ civil enclaves as per the provisions of Section 12 of the Airports Authority of India Act, 1994 or as per the commercial practice. Therefore, this clause would cover all the services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons authorised by it, which have nexus with smooth, efficient and commercial operation of an airport/ civil enclave, passenger safety and facilitation, air traffic control in the vicinity of the airport/ civil enclave and navigation facility to the aircrafts in the Indian airspace at any point of time, whether overflying the country or enroute from one domestic airport to another or whether intending to land at an Airport/ civil enclave. During the period prior to 01.07.2010, when provision to Section 65(105)(zzm) making the provisions of Section 65A inapplicable to this clause was not there, the services specifically covered by other clauses of Section 65(105), even if provided by AAI or a person authorised by it in an airport/ civil enclave, would be taxable as the service covered by the respective clauses, but w.e.f. 01.07.2010, even if a service, on the basis of Section 65A is covered by some other clause of Section 65(105), it would be treated as service covered by clause (zzm) of Section 65(105) if it has been provided in an airport/ civil enclave by AAI or by a person authorised by it. 17. The other point of dispute is the interpretation of the expression- in any airpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the equipments/machines with whose help the services has been performed and irrespective of the location of the service recipient. 18. The question of liability to service tax under section 65(105) (zzm) of various disputed activities shall be decided on the basis of our conclusions in para 16.6 and 17.1 above. 19. The demand of Service Tax on the Revenue from Left Luggage Facility, Rest Rooms/Retiring Rooms and supply of Trolleys for courier service: 19.1 These services in terms of Appellant's submissions are provided by the AAI and charges for the same are directly collected by them. Though these services during the period of dispute, were not covered by clauses of Section 65(105), other than (zzm), since these services have been provided by the AAI (Appellant) within the area of Airports/Civil Enclaves, and are in relation to passenger amenities/ facilities as discussed in para 16.6 above, the same would be taxable under section 65(105)(zzm) as service provided to any person by AAI in the Airport/Civil Enclave. Thus the service tax demand of ₹ 14,77,164/- has to be upheld. 20. Service tax on Revenue from Passenger Service Fee: 20.1 In terms of Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vigation Landing Facility Charges (TNLC): 21.1 These are the Navigational Facilities provided by the appellant (AAI) to the Aircrafts of various Airlines while the same are in the Air Route Navigational Facility is in respect of the Aircrafts, Overflying an Airport/Civil Enclave and the Terminal Navigational Landing Facility (TNLF) is the Navigational Aid to the Aircrafts which intend to land at a particular Airport/Civil Enclave. In both the cases, the Navigation Aid is provided to the Aircraft while the same is in the air. The contention of the Appellant is that providing Navigation Aid to the Aircrafts which are in the air is not the service provided by them or their authorised person in the Airports/Civil Enclaves. It has also been pleaded that Route Navigational Facility is provided enroute from the starting point to the vicinity of the arrival station and this Navigational Facility is provided with the help of equipments installed at the Aeronautical Communication Stations which may not be necessarily within the area of Airport/Civil Enclaves, and that majority of the Aeronautical Communication Stations providing Route Navigational Aid to the Overflying Aircrafts are locat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing this service, the location of the equipment like Transmitters, Radars etc. whether within the Airports/Civil Enclave area or outside the Airports/Civil Enclave area, is irrelevant, as such equipments are after all extension of the human faculty of perception. Route Navigation Facility involves providing Navigational Aid to an Aircraft which is flying in the air from the starting point to the vicinity of the arrival station. This Navigational Aid is provided with the aid of equipments installed at the Aeronautical Communication Stations located on the ground and now, also with the Aid of equipment installed in the satellites orbiting earth. Providing Navigational Aid from the ground Aeronautical Communication Centres involves transmission of radio signals which can be received by the equipments/instruments on board the Aircrafts and from which the Aircraft can determine its exact bearing from a particular Aeronautical communication station. Some Aeronautical Communication Stations also have distance measuring equipments which allows the equipment installed in the Aircrafts to determine the exact distance from the station. However, the appellant's plea is that the Aeronautica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mp sum amount as licence fee/royalty from them. The highest bidders pay the licence fee/royalty to the appellant for a specified period and during that period they manage the facility of car parking, access to the Airport and issue of season tickets/temporary passes by charging fee from the users of the facilities. In this case the demand of service tax is on the amount which the appellant received from the concessionaires/licensee managing the car parking, access to the Airport and issue a season tickets/temporary passes. 22.3 Inside an Airports/Civil Enclaves there are a number of business establishments like Restaurants, Duty free Shops, Book Shops and other Shops, Counters of the Airlines, Money Changers etc. All these persons have been given space inside the Airports/Civil Enclave on rent, which is to be used for the purpose of their business. Some spaces have been given for display of hoardings/advertisements. 22.4 According to the Department, the rent for letting out of the space would attract service tax as letting out of immovable property for furtherance of business and commerce is service and in this regard, reliance is placed Larger Bench judgment of Hon'ble D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckets on behalf of the Appellant, it is the Appellant who would be liable to pay service tax on these services and secondly in any case, the activity of the appellant of transferring their right to the licensees to collect the entry tickets or parking fee or fee for issue of temporary passes and season tickets for fix amount of licensing fee/royalty is like renting of business and on the amount of licence fee/royalty being received by the appellant from the concessionaires/licensees managing the visitor's entry, car parking and issue of season tickets temporary passes, service tax would be chargeable under section 65(105)(zzm). 22.6 Coming first to the question as to whether letting out/leasing out of the space inside the Airports/Civil Enclaves to various Airlines and business establishments for their business for rent/lease charges is service and if so, whether it will be covered under section 65(105)(zzm), we are of the view to key question to be decided in this regard is as to 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance of business or commerce by itself could not entail any value addition. If the definition in Section G5(90a) is taken into consideration, there is a deeming concept with regard to service and the taxable service is based or founded on renting of immovable property. The learned senior counsel for the petitioner would contend that the Parliament cannot, by deeming fiction, create a tax liability to bring it within the purview of Entry 97 of List I as that would be an indirect entrenchment on Entry 49 of List II. Per-contra, Mr. Chandhiok, relying on the decision in Tamil Nadu Kalyana Mandapam Assn. (supra), submits that the concept of service, as is understood by a layman, is not applicable to the concept of taxing statute under the constitutional framework. He would further contend that once this Court holds that the levy does not pertain to a tax on land or building but an activity like renting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce, it would come within the residuary power of the Parliament and the same should put the controversy to rest. 62. As presently advised, we shall dwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolutely absent. In this context, the concept of rent has to be appositely understood. A rent is basically a reward paid for the use of the land. The tenant or the occupant pays the same to use the premises. In the economic concept, rent can be categorized into two heads, namely, contract rent and economic rent. Contract rent fundamentally refers to the total amount of money paid for use of the land and economic rent is a part of the total payment which is made for the use of land and it is estimated on many a ground. The economic rent can be contract rent minus interest on the capital invested. To give an example, a tenant pays ₹ 20,000/- per year as contract rent but the interest on capital invested is ₹ 3,000/- per year. Thus, the remaining amount, that is, ₹ 17,000/- (Rs.20,000.00 - ₹ 3,000.00) is paid for the use of the land. 65. The concept of economic rent can also represent an amount which a factor can earn in its next best alternative use. To give an example, a piece of land yields in a particular use ₹ 5,000 in a year. If it is transferred to its next best use, it can earn a better income. At one point of time, the Theory of Rent was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of scarcity of land or building, goodwill, accessibility and similar ancillary advantages which constitute value addition. 66. The modern economic theory of rent also has a nexus with demand and supply. In this analysis, rental is hiked because supply of land is scarce in relation to its demand. This economic concept is called scarcity theory of rent . This includes the fact of competition and quality. According to the modern theory, rent is not peculiar to land alone but arises in the case of many a factor which earn over and above the transfer earnings. There is a distinction between actual earnings and transfer earnings . According to the modern analysis of rent, it is not peculiar to land alone and the concept of transfer earning is more attracted towards the building depending upon its use. As an economic concept, it has been developed that rent qua building or premises or, for that matter, land has a nexus, an inseparable one, with the potentiality of its use in a competitive market. The economic growth has an effect on rent. In this regard, modern economists have evolved certain methods, namely, technical progress in methods of production, development in means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 70. In view of our conclusion, the decision on the first Home Solution case does not lay down the law correctly in as much as in the said decision, it has been categorically laid down that even if a land/building is let out for commercial purposes, there is no value addition. Being of this view, we overrule the said decision. 22.7.1 Thus in this judgment, Hon'ble High Court has held that:- (a) once there is value addition, element of service is involved and service is associated with value addition, as evolved by the judgments of the Apex Court (para 68 and 69); and (b) in renting of immovable property for use for business or commerce the economic rent portion of the total rent which represents the money paid for use of the property for a particular business can be treated as representing value addition and hence service (para 65 68 of the above judgment). 22.8 It will be seen that the judgment of Hon'ble Delhi High Court in case of Flammingo Duty free Shops Pvt. Ltd. (Supra), judgment of Bombay High Court in case of Sahara Airlines Ltd. Vs. Union of India (Supra) and judgment of Hon'ble Kerala High Court in case of C.C.E. Vs. Cochin Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Retail Pvt. Limited is considered as simple letting out of immovable property, the same by applying Section 65A(2) would not fall within the taxable service of airport services under clause (zzm) of Section 65(105), as letting out of immovable property was more specifically covered under clause (zzzz) of Section 65(105) and Section 65A(2) mandates that the sub-clause which provides the most specific description would be preferred to a sub-clause providing a much general description. However, this judgment is not applicable to this case as- (a) the period of dispute in this case is of prior to 01.06.2007 when clause (zzzz) of Section 65(105) covering renting of immovable property for business or commercial was not there and such transactions of renting of immovable property were not specifically covered by any clause of Section 65(105); and (b) As is clear from the wordings of Section 65A, this section can be invoked only for classification of taxable service i.e. the services enumerated in various clauses of Section 65(105) and a service provided to any person by AAI /its authorized person in an Airport/ Civil Enclave if not specifically covered by any clause ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. According to Encyclopedia Britannica, royalty is -'the payment made to the owners of certain types of rights by those who are permitted by the owners to exercise the rights . Therefore, the licence fee being received by the Appellant from licensees/ concessionaires operating the facilities mentioned above in the Airports/Civil Enclaves is economic rent which represents value addition and therefore this activity has to be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority has to provide itself or through a person authorised by it. He has also observed that the activity of service of sale of time or space for advertisement became taxable w.e.f. 01.05.06 and that for this reason also, no service tax could be charged during the period of dispute on the Revenue from this service. The appellant support the Commissioner's Order on this point. 23.2. We are of the view that both the 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, since it is a service provided in the Airport/Civil Enclave by the AAI to a person and is a service which AAI is mandated to provide in terms of Section 12 of the Airports of India Act, 1994 (as the same is in the best commercial interests of Ml), the same as discussed in para 16.6, would be covered by the provisions of section 65(106)(zzm) and would be taxable. The other reason given by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking extended paid under proviso to Section 73(1) of the Finance Act, 1994 as in para 46 of the Show Cause Notice, it is alleged that in view of its such commissions and omissions, it appears that provisions of proviso to Section 73(1) of the said Act are squarely applicable in the case against M/s. AAI . The demand for period beyond the normal limitation period of one year would survive only if the extended period under proviso to Section 73(1) is invokable, or there is provisional assessment. 25.2 Though the issue of limitation has not been argued by either side, in our view, this issue also has to be considered, as interveners would be adversely affected to the extent, the service tax demand is confirmed against the Appellant (AAI). 25.3 Since in para 82 of the impugned order, the commissioner observing that:- (a) this is not a case, where the Appellant AAI intended to defraud the exchequer or purposely evaded the payment of service tax; and (b) he does not see the element of mens rea, as AAI is a body formed under an Act of the parliament and AAI, being a government body, cannot be said to have a pre-determined attitude and wilful intention to evade th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the matter would have to be remanded. If the assessments for this period can be treated as provisional, the service tax demand for this period would not be hit by limitation. The demand for the remaining period i.e. from March'05 to 31.03.06 is not hit by limitation. 26. Penalty on the Appellant under Section 76 and 77 of the Finance Act, 1994: 26.1 While the Commissioner for the reasons recorded in para 82 of the impugned order has refrained from imposing penalty on the Appellant under Section 78, he has still imposed penalty on them of ₹ 1000/- under Section 77 for various omissions and penalty under Section 76 of ₹ 200/-per day for the period during which the failure to pay the service tax also continues subject to the penalty not exceeding the amount of service tax demanded. In our view, 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. In this case, the Appellant as early as on 13.09.04 had addressed a letter to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute keeping in view our observation on para 21 to 21.3 and 24 of this order. If the service tax on revenue from the above streams in held to be chargeable, the same would be recoverable only for the normal limitation period or for the period for which the assessments were provisional. 27.3. Penalty on the Appellant under section 76 and 77 is set aside and accordingly in de-novo adjudication, there is no question of imposition of penalty on the Appellant under Section 76 77 of the Finance Act, 1994. 27.4. The matter is, therefore remanded to the Commissioner for de-novo adjudication for quantification of service tax liability keeping in view our decisions and observations in this order. During de-novo adjudication, on the question of limitation, the commissioner has to give his clear findings on the point as to whether the assessments for the period from 10.09.04 to Feb.'05 can be treated as provisional assessment and if the assessments for this period cannot be treated as provisional, whether the demand for this period is within the normal limitation period. 28. The impugned order with regard to the portion of service tax demand which has not been challenged in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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