Airport service
CESTAT, BANGALORE
BENCH
Cochin International Airport Ltd.
v.
Commissioner of Customs & Central Excise, Cochin
T. K. Jayaraman, Technical Member
And S. L. Peeran, Judicial Member
Stay Order No. 709/2007
ST/Stay 24/2007
In Appeal No. ST/31/2007
September 3, 2007
Section 65, read with section 86, of the Finance Act, 1994 - Airport services - Appellant-assessee was absolute owner of an airport - Air India had undertaken ground handling services at airport and remitted certain percentage of gross turnover received from all airlines to assessee in form of royalty - Service tax was demanded from assessee under category of airport service - Assessee denied its service tax liability contending that it was owner of airport and did not have in charge of management of airport; royalty received from Air India would not be liable to service; licencing fees received by it were only rentals it was not liable to service tax under Boards Circular F.No.80/10/2004-ST dated 17-9-2004 - Commissioner rejected all contention of assessee and held that assessee was liable for service tax on royalty received from Air India and on licencing fee received from other parties - Coming to above conclusion Commissioner observed that assessee was a company having charge of management of airport and in view of Ministry Circular dated 17-9-2004 royalty received from Air India was taxable and licencing fee received from various parties was not in nature of rent but for service element in operation carried out - However, coming to above conclusion Commissioner had not stated nature of service provided by assessee in return for royalty from Air India - Whether Commissioner was justified in holding that assessee was a company in charge of management of airport - Held, yes - Whether entire issue of service tax liability on royalty and licencing fee was debatable - Held, yes - Whether in view of above facts and circumstances of case and taking into consideration plea of financial hardship assessee was to be directed to pre-deposit part of demand - Held, yes [Para 3.5]
The appellant-assessee was the absolute owner of an airport. Air India had undertaken ground handling services at the airport including transportation of cargo from ramp to the cargo complex. Air India had collected and remitted service tax on the gross turnover. 15 per cent of the gross turnover from all Airlines was given to the assessee.
The Commissioner held that the assessee was liable to discharge service tax liability on the amounts collected from Air India and also on the licence fee collected from various parties under category of ‘airport service’.
On appeal:
The assessee had argued that it was the owners of the Airport and did not have the charge of management of the Airport. The Commissioner, after going through the relevant statutory provisions, had negatived this contention of the appellant. It was to be agreed with the Commissioner that the assessee was a company having charge of management of the Airport. [Para 3.2]
The second point urged before the Commissioner was that the amount of royalty received by it from Air India for providing the ground handling services, as authorised by it, would not be liable to service tax. The Commissioner had discussed that issue in paras relying on the Ministry’s Circular dated 17-9-2004, and had held that the royalty received from Air India was liable for service tax. He was not satisfied with the contention of the assessee that service tax had already been discharged by Air India on the amount received by the assessee from them. While holding that the royalty was liable to service tax, the Commissioner had not stated the nature of the service rendered by the assessee in return for royalty from Air India. Thus, the findings lack clarity. According to him, there was also no evidence produced by the assessee to the effect that Air India had already discharged service tax on the royalty amount paid to the assessee. [Para 3.3]
The third point urged by the assessee before the Commissioner was that the licence fee collected by it, were only rentals and it was not liable to service tax in terms of the Circular F.No.80/10/2004-ST dated 17-9-2004. In the order-in-original, the Commissioner had referred to the agreements entered by the assessee with various parties. The Commissioner had given a finding that the assessee granted exclusive right to one of its client to put up the refueling facilities for aircrafts in return for royalty. The finding was that that royalty was not lease rentals for space and it was quite different. Therefore, he had come to the conclusion that this amount was not covered by the Board’s Circular dated 17-9-2004. The assessee had awarded licence to another for operating a video conferencing centre in the departure area of the Domestic Terminal for a consideration of a fixed monthly liecnce fee and also 5 per cent of the total business turnover or minimum amount of Rs. 1,000 whichever was higher on a monthly basis. The Commissioner had concluded that the above income was not in the nature of rent but for the service element involved in the operations carried out. Similarly, he had analysed all the other agreements and come to the conclusion that they would not be covered under the category of rents. On the other hand, the assessee argued that these licence fee collected were nothing but rentals and, therefore, would not be liable to service tax. [Para 3.4]
On going through the impugned order, it was opinioned that the entire issue of service tax liability on royalty and licence fee was debatable. The agreements entered between the assessee and the various parties have to be thoroughtly scrutinized before coming to a proper conclusion. If one goes simply by Ministry’s circular, then, one would conclude that both royalty and licence fee would come under the service tax net. But such a conclusion may not accord with the law. The assessee had also pleaded financial hardship. Taking into account all these factors, the appellants should be directed to pre-deposit a sum of Rs. 35 lakhs. On such pre-deposit, the balance amount of service tax, interest and penalties stood waived and recovery was to be stayed. [Para 3.5]