Airport Authority of India (hereinafter referred to as “AAI”) has been constituted under Airports Authority of India Act, 1994 as amended by Airport Authority of India (Amendment) Act, 2003, for better administration and cohesive Management of all the Airports and Civil Enclaves in India whereat air transport services are operated and also for control of aeronautical communication stations for civil aviation. With effect from 10.09.04, sub clause (zzm) was added to clause (105) of section 65 of the Finance Act, 1994 and in terms of this sub clause, “any service provided to any person in an airport or a civil enclave by AAI or any person authorised by it”, was brought within the definition of “taxable service” and accordingly such services became taxable. In terms of section 65(3d) of the Finance Act, 1994, “Airport Authority” means Airport Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 and includes any person having charge of management of an Airport or a Civil Enclave. In terms of section 65(3c) and 65 (24a) of Finance Act, 1994, the words Airport’ and ‘Civil Enclave’ have meaning assigned to them in clause (b) and (i) respectively of section 2 of the Airports Authority of India Act, 1994. Accordingly ‘Airport’ means landing or taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes Aerodrome, as defined in section 2(2) of the Aircraft Act., 1994. In terms of section 2(2) of the Aircraft Act, “Aerodrome” means any definite and limited ground or water area intended to be used, either wholly or in part, for landing or departure of aircrafts and includes all buildings, sheds, vessels, piers or other structure thereon or appertaining thereto. In terms of section 2(i) of the Airports Authority of India Act, ‘Civil Enclave’ means the area, if allotted at an airport belonging to any armed force of the union, for use by persons availing of air transport service from such airport or for handling of baggage or cargo by such services and includes land comprising of any building and structure on such area.
Prior to 10.09.2004, 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 operate inside the Airports/Civil Enclaves, Supply of Trolley to Couriers and other miscellaneous income. In respect of the Revenue from Traffic related activities, the Department was of the view that in addition to the facilities of landing, parking and handling of the aircrafts, provided by the AAI, the facilities of route navigation to overflying aircrafts, terminal navigation facilities provided to the aircrafts, landing at an Airport/Civil Enclave and passenger service fees, would also be covered by the term “any service provided by Airport Authority of India or a person authorised by it in the airport/Civil Enclave” and would be taxable under section 65(105)(zzm). In respect of Revenue from non-traffic activities, the Department was of the view that all the activities including activities of renting of space inside Airports/Civil Enclaves to various persons for commercial activities would also be covered by Section 65(105)(zzm) and would be taxable.
After concluding the hearing, the Bench felt that the issues arising in this case in the context of Airport Services involved principles which have wider application as well, this matter should be heard further by inviting Bar Association. Accordingly the matter was fixed for hearing on 20.02.2014 and on this date, a miscellaneous Order No. 120/2014 dt. 20.02.2014 was passed by which the Bench appointed Sh. N. Venkatraman- Senior Advocate and Sh. V. Laxmikumaran- Advocate to assist the court in this matter as amicus curiae on the following issues.
“(1). Does the provision, [Section 65(105)(zzm)] bring within the tax net all services, defined and enumerated as taxable services elsewhere and even unremunerated and undefined services?(2). Is the provision a mere consolidation endeavour, encompassing only taxable services (elsewhere in the Act, defined and enumerated), when provided within an airport or a civil enclave, under this head?(3). If the provision embraces ‘services’ in a generic connotation (whether elsewhere defined and specified as taxable or not) within its scope, what is the purpose of the proviso; since Section 65A merely guides identification of a transaction as falling into a specific taxable service category, when it facially may fall into more than one taxable service category?(4). If all “services”, whether taxable or otherwise, including those not enumerated or defined elsewhere in the Act, fall within the scope of the provision, how is a transaction to be identified as a service.(5). w.e.f. 01.07.2012 (by 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 contract(zzzza) are required to be interpreted without reference to the exclusionary elements embedded in the definition of these respective services, defined elsewhere in the Act; when considered under section 65(105)(zzm)?(7) Since the negative list under Section 66D is operative only w.e.f. 01.07.2012, whether service falling within Section 65(105)(zzm) would include services falling within the negative list as well.(8) Services in relation to an aircraft, inside or outside the precincts of an airport; and services by way of transportation of goods by an aircraft from a place outside India to the customs station of clearance in India, are enumerated in Clause (a)(ii) and (p)(ii) of the negative list in Section 65D. Whether these transactions are also within the ambit of “airport service”, prior to the negative list regime.(9) In the absence of a definition of “service” in Section 65(105)(zzm), if “any service” is to be interpreted as an undefined service as well, whether the provision would be open to challenge of constitutionality on the ground of vagueness; abdication of legislative functions under Article 265; or excessive delegation of essentially legislative function to the executive branch. If so, whether a restricted meaning to “any service” must be applied, to save the provision from the voice of unconstitutionality?(10). If a restrictive interpretation (reading down) is legitimately invited, how is the restriction to be crafted?”
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.
The Department pleaded that the Board Circular was wrong.
The contention of the Department is that for attracting service tax under section 65(105)(zzm), any service, whether taxable or non taxable, should have been provided to any person in the Airports/Civil Enclaves by AAI or its authorised person; that the clarification in the Board’s Circular No.80/10/04-ST dt. 17.09.04 clarifying that the activity of letting out of the premises is not rendering of service and for this reason no service tax would be chargeable on rental/lease charge for part of Airport/Civil Enclave leased out/rented out, is based on wrong understanding of law, as subsequently a larger bench of Hon’ble Delhi High Court has held that letting out of immovable property for business or commerce is service and on this basis upheld the levy of service tax on this activity by introduction of clause (zzzz)of section 65(105) w.e.f. 01.06.07 and that the judgments of various High Courts are based on concession by the Department counsel and also on the Board’s Circular dt. 17.09.04 which is contrary to the law laid out by the Larger Bench of Hon’ble Delhi High Court in case of Home Solutions Retails (India) Ltd. and others Vs. Union of India.
Both the amicus curiae, however, have expressed the view that-
(a) literal meaning of clause (zzm) would make this levy vague and therefore liable to be struck down as unconstitutional;(b) in order to save a provision from being struck down as vague or unconstitutional, it is necessary for the courts to intervene and provide the boundaries;(c) in order to do so, assistance can be taken from Section 12 of the Airports Authority of India Act, and accordingly only those services provided by AAI, or authorized person in the Airports/ civil enclaves to any person would be covered by this clause, which the AAI is expected to provide the terms of its function mentioned in Section 12 of the Airports Authority of India Act.
The Tribunal took the view that 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. 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.
Held: 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.
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.
Tribunal is of the view that 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. In other words the clause (zzm) during the period of dispute would cover all services provided in an airport / civil enclave by AAI or persons 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 provisions, 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.
Interpretation of the expression- “in any airport or a civil enclave”. : According to the appellant, this expression would cover only the services provided within an Airport or Civil Enclave and would not cover the Route Navigation service provided to Airlines in respect of overflying Aircrafts or Terminal Navigation Landing services provided to the Airlines in respect of their Aircrafts which intend to land at an Airport or a Civil Enclave. The Department’s contention is that this expression would also cover the services provided “from an Airport or a Civil Enclave” and accordingly the services of Route Navigation and Terminal Navigation would be covered by section 65(105) (zzm).
Held: such services would be treated as having been provided in an Airport or a Civil Enclave if the same have been performed within the area of an Airport/Civil Enclave or are in respect of the immovable property located within the airport/ Civil Enclave area. A service would be treated as performed within the Airport/Civil Enclave area if has been performed by the persons of the AAI/authorised person deployed within the area of Airport/Civil Enclave, irrespective of the location of the equipments/machines with whose help the services has been performed and irrespective of the location of the service recipient.
Based on these conclusions, the Tribunal decided the taxability of the following activities:
Service Tax on the Revenue from Left Luggage Facility, Rest Rooms/Retiring Rooms and supply of Trolleys for courier service: 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. Demand of Rs.14,77,164/- upheld.
Service tax on Revenue from Passenger Service Fee: 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. For quantification of the service tax on passenger service fee, the matter remanded, to the commissioner.
Service Tax on Route Navigation Facility Charges (RNFC) and Terminal Navigation Landing Facility Charges (TNLC): service of Navigational Aid to the overflying Aircrafts or to the Aircrafts which intend to land at a particular Airports/Civil Enclave can be treated as provided in the Airports/Civil Enclave only if this service has been entirely provided by the persons deployed by the AAI/Authorised Person inside the Airports/Civil Enclave. For the purpose of providing 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. However, the appellant’s plea is that the Aeronautical Communication Stations which provide Navigational Aid to the Aircrafts and the persons manning them are not always located in the Airport/Civil Enclave area. This point of fact has to be determined by the Adjudicating Authority and for which this matter is remanded to him for de-novo adjudication after ascertaining as to whether the Route Navigation Aid and Terminal Navigational Landing Aid to the Aircrafts is provided entirely by the persons deployed by the appellant at the Airports/Civil Enclaves.
Service Tax on Revenue from the Rental/Lease Charges, Public Admission Fee, issue of Season Tickets and Temporary passes and Car Parking: 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.
Service Tax on the amount received by appellant for letting out space in the Airports/Civil Enclaves for display of Hoardings/ Advertisement etc.: It 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 Rs.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 is set aside and service tax demand on this amount is confirmed.
Service Tax demand on 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. 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 is set aside and matter remanded to the Commissioner for de-novo adjudication.
Conclusion:
Service tax is chargeable on the Appellant’s revenue from:-
(a) Passenger service fee;(b) Left luggage facility, rest rooms/retiring rooms facility and supply of trolleys for courier service;(c) Renting/leasing of space inside Airports/Civil Enclaves to various Airlines and other persons for their business activity;(d) Renting of space inside the Airports/Civil Enclaves for various persons for putting up hoardings/advertisements; and(e) Lump sum amounts received as licence fee from licensees/ concessionaries for operating/managing car parking facility, public admission and issue of season tickets/temporary passes.