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Airport Services [Sec 65(105)(zzm)]
Effective upto 30th June, 2012
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Landmark Service Tax Judgment - Airport Services

INTRODUCED: With Effect from 10th September 2004
 
Contents
Scope
Exemption
Relevant Notifications / Circulars
Landmark Judgements
Accounting Code
Service Tax 00440258
Interest
00440259
Penalty 00441391
 
DEFINITION:

 According to Section 65 (105) (zzm) to any person, by airports authority or by any other person, in any airport or a civil enclave.

Provided that the provisions of section 65A shall not apply to any service when the same is rendered wholly within the airport or civil enclave;

 

According to Section 65 (3c) “airport” has the meaning assigned to it in clause (b) of section 2 of the Airports Authority of India Act, 1994 (55 of 1994); accordingly “airport” means a landing and 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, 1934.  
According to Section 2(2) of Aircraft Act 1934 "aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or appertaining thereto

According to Section 65 (3d) “airports authority” means the Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 (55 of 1994) and also includes any person having the charge of management of an airport or a civil enclave; Accordingly “airports authority” means with effect from the appointed day, the Central Government shall, by notification in the Official Gazette, constitute an authority to be called the Airports Authority of India. 

 

 
According to Section 65 (24a) “civil enclave” has the meaning assigned to it in clause (i) of section 2 of the Airports Authority of India Act, 1994 (55 of 1994); accordingly “civil enclave” means the area, if any, allotted at an airport belonging to any armed force of the Union, for use by persons availing of any air transport services from such airport or for the handling of baggage or cargo by such service, and includes land comprising of any building and structure on such area.

 

 
SCOPE:
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Person liable to pay Service Tax is service provider i.e. Airports Authority of India (AAI) or any person authorized by it, or any other person having charge of management of an airport. 

Services provided in an airport or civil enclave, to any person by Airports Authority of India (AAI), a person authorized by it, or any other person having charge of management of an airport is taxable under this category.  

This includes variety of services provided to airlines, as well as for cargo and passenger handling such as security, transit facilities, landing charges, terminal navigation charges, parking and housing charges and route navigation facility charges. It would be on the gross amount chargeable by AAI or other such authorized person. Thus, charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to service tax. 

However, in case a part of airport / civil enclave premises is rented / leased out, the rental / lease charges would not be subjected to service tax under this service, as the activity of letting out premises is not rendering a service by Airports Authority of India. It would be taxable under renting of immovable property service.

 
SERVICE TAX EXEMPTIONS:
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(a) Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. 10,00,000/- (Service Tax Notification No. 8/2008-ST dated 01.03.2008) 

(b) Services provided to the UN and International Agencies 

(c) Services provided to Special Economic Zones (SEZ) and SEZ developers

(d) Exported services as defined in ‘Export of Services’ Rules  

(e) Services provided to foreign diplomatic missions, family members of diplomatic missions etc. 

(f) Services provided by Reserve Bank of India 

 

(g) Out of total value of service provided proportionate Value of goods and material provided by the Service Provider

 
RELEVANT SERVICE TAX NOTIFICATIONS:
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Service Tax Notification No. 10/2011-S.T., dated 01-03-2011 Exemption to the work contract services provided within airport.
Service Tax Notification No. 43/2010-S.T., dated 28-06-2010 Exemption towards 75% value of service of GTA provided within airport.
Service Tax Notification No. 42/2010-S.T, dated 28-06-2010 Exemption to the services of industrial or commercial construction provided within airport.
Service Tax Notification No. 41/2010-S.T., dated 28-06-2010 Exemption to specified activities of cargo handling services, site formation services, storage and warehousing services aircraft operator services.
Service Tax Notification No. 40/2010-S.T., dated 28-06-2010 Abatement notification.
Service Tax Notification No. 37/2010-S.T., dated 28-06-2010 Exemption to airport services provided for exports, by way of refund.
Service Tax Notification No. 36/2010-S.T., dated 28-06-2010 Exemption for value of service received in advance by service providers prior to 01-07-2010.
Service Tax Notification No. 31/2010-S.T., dated 22-06-2010 Exemption to specified services provided within airport.
Service Tax Notification No. 18/2004-S.T., dated 10-09-2004. Amount of value received for taxable services prior to 10-09-2004.
 
RELEVANT SERVICE TAX CIRCULARS/INSTRUCTIONS/TRADE NOTICES:
Service Tax CBEC Instruction Letter (F. No. 334/3/2010-TRU) dated 01-07-2010
Service Tax CBEC Instruction Letter (F. No. 334/1/2010-TRU) dated 26-02-2010
Service Tax Circular No. 80/10/2004-ST, dated 17-09-2004 Scope and Value of Airport Services Introduced by Finance Act, 2004.
 
LANDMARK SERVICE TAX  JUDGMENTS:
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COCHIN INTERNATIONAL AIRPORT LTD v. COMMISSIONER OF CUSTOMS & CENTRAL EXCISE COCHIN (STO 2007 CESTAT 1068)
COCHIN INTERNATIONAL AIRPORT LTD. v. COMMISSIONER OF C. EX., COCHIN (STO 2007 CESTAT 107)
COCHIN INTERNATIONAL AIRPORT LTD. v. COMMR. OF C. EX. & CUS., KOCHI (STO 2007 CESTAT 106)
COCHIN INTERNATIONAL AIRPORT LTD. v. COMMISSIONER OF C. EX., COCHIN (STO 2007 CESTAT 105)
COCHIN INTERNATIONAL AIRPORT LTD. v. COMMR. OF C. EX. & CUS., COCHIN (STO 2006 CESTAT 240)
 
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Case Laws Related

  • STO 2013 CESTAT 906
  • Airport Service: Services related to managing the parking facilities at Airports to the passengers as well as to the visitors is fully covered under the taxable Airport Service as defined under Section 65 (105)(zzm).

  • STO 2013 CESTAT 164
  • Telecom service: Merely creating a fiction of no consideration received by the appellant in respect of the aforesaid nature of free service provided by it, the appellant appears to have been immensely benefited by reduction of monetary package of remuneration to its eligible, employees, their relatives and employees of Bharti Group of companies. Such undisclosed benefit of appellant was at the cost of Revenue. The appellant failed in the course of hearing to satisfy that value of service were disclosed perquisite to its employees in its account and disclosed to Income tax Authority.

  • STO 2011 CESTAT 183
  • Stay: Airport Service v/s Storage & Warehouse Service: From 10.9.2004 all services given by any airport are covered under Airport service : Stay granted subject to partial pre deposit.

  • STO 2011 SC 307
  • Service Tax: Airport service - Liability of licensee - Airport admission ticket charges collected by appellant as licensee of Airport Authority of India (AAI) - Licence fees paid to AAI every month by appellant but required fees collected from users and facilities provided to customers by appellant - AAI provided only bare space - All expenses for providing services to passengers and visitors to be borne by appellant - Agreement stipulating that licensee to pay all taxes as leviable on him - Admission ticket charges collected so as to provide amenities and facilities to passengers and visitors as per licence agreement - Appellant being person authorized by AAI to provide services in express terms and conditions, steps into the shoes of AAI for services provided based on authorisation and is liable to pay Service tax - Section 65(105)(zzm) of Finance Act, 1994. [paras 3, 5, 13, 15, 16, 17]

  • STO 2010 CESTAT 155
  • Service Tax: Airport Services: Royalty from Air India: Services provided to various air lines and other facilities at the airport which needs to be managed by the appellant, has been contracted out to Air India and they have discharged the service tax liability on gross amount collected. This being the factual matrix, the demand of service tax on the royalty charges collected by appellants from M/s. Air India can be construed as an amount for lease or rental charges for functioning in the appellant's area. No service tax liability on amounts collected from M/s. Air India (para 9)

    Service Tax: Airport Services: Royalty Charges: License Fee: Space allotted on lease inside the airport premises : This would indicate that the licensees i.e. M/s Thomas Cook, Atlas Jewellery etc., have taken the area on lease and as per the CBEC Circular dated 17.9.2009, such charges would not be subject to service tax as the activity of letting out premises is not rendering services. The entire tenor of the agreements entered by the appellant with the other parties clearly speak of letting out/leasing out the space in the Cochin International Air Port for a specified term, renewable or being leased out to any other bidder. (para 9.1, 9.2)
    Service Tax : Airport Services : Garbage Disposal Charges : Garbage disposal is collection of garbage like waste material, discarded items scrap from the Air Port premises. Though there is no agreement provided for this, the explanation given by, the appellant in the grounds of appeal indicate that these are nothing but sale of garbage from the Air Port premises. This activity would not be liable to service tax. (para 9.3)

    Service Tax: Airport Services: Courtesy coach parking and surcharge on prepaid taxi: There is a clear a finding of the lower authorities that the courtesy coach parking services are services extended to the courtesy coaches, which bring the passengers into the Air Port. As regards income from surcharge on Pre-paid Taxi, this amount is collected by the appellant from the cooperative societies who operate the Air Port taxi services in addition to the charges which are charged by such taxi operators. No justifiable reason for non-inclusion of this amount for discharge of the service tax liability. (para 9.4)

    Service Tax: Airport Services: Guest Room charges: The guest room charges are realized from the passengers who are accommodated in the guest rooms due to contingencies. This accommodation is provided only to the passengers who have been issued with boarding passes and tickets and this facility is not open to others. The amount so collected would definitely fall within the purview of the services provided under the category of Air Port Services. (para 9.5)

    Service Tax: Airport Services: Entry ticket charges and issue of commercial passes: These charges are charged by the appellant for restricting the entry to public in to the Air Port. The said income is not in respect of any services rendered by the appellant as an Air Port Authority. This amount collected and shown as income could not be construed as services rendered and liable to service tax. (para 9.6)

    Service Tax: Airport Services: Penalty: Remand: The service tax liability and the consequent interest liability and penalty charges needs to be requantified by the lower authorities. For the limited purpose of requantification of the service tax liability as per our finding as recorded herein above, the matter is remanded to the lower authorities. After arriving at the correct quantification of the service tax liability the lower authorities will also decide upon the quantum of penalties. (para 9.6)

  • STO 2007 CESTAT 1068
  • Stay: Airport services: Entire issue of Service tax liability on royalty and licence fee is debatable.  Financial hardship urged. Application partly allowed.

  • STO 2007 CESTAT 107
  • Service Tax: Service tax on "Users Fee" collected from outgoing International passengers: Scope: This collection of fee has been struck down by the High Court of Kerala as not sustainable. Therefore the appellants contested the matter with regard to the levy of service tax on this fee. The appellant's matter came up before this Bench and this Bench after a detailed consideration, by Final Order Nos. 464 to 466/2007 dated 18-4-2007 STO 2007 CESTAT 106 upheld their contention and the service tax on the "users fee" has been set aside.(Para 2).

    Appeal allowed.

  • STO 2007 CESTAT 106
  • Service Tax: Airport Services: Demand:User fees: Airport Authority alone can charge fee for various services. Moreover, the services rendered by the airport authority are actually services rendered to airliners. Therefore, such a levy can be made from the airliners and not from passengers. The High Court has given such a finding while interpreting Section 17 of the National Airports Authorities Act 1985. In the present case also, the so-called 'user development fee' has not been collected by Airport Authority of India. The purpose of collecting the fee is only to augment the financial situation of CIAL. It is not the case of the Revenue that the amount collected by way of 'users fee' is utilized by the Airport Authority. The appellants have stated that all these services to passengers are rendered by the airliners and also the Airport Authority of India. All ground handling services at the airport are rendered by Air India. The Air Traffic Services including ground safety services in coordination with other agencies at the airport are rendered by Airport Authority of India. All the above services attract Service Tax and the same is being duly remitted for such services by the service providers. The Adjudicating Authority has simply made a statement that the 'users fee' collected has a nexus with the service rendered by the appellant. He has not discussed what service has been rendered by the appellants to individual passengers for collecting the 'users fee'. The appellant is a company registered under the Companies Act and has established a private airport for the benefit of public. The Government of Kerala is one of the shareholders of the Company. The appellant is providing certain facilities to airlines such as landing facilities, parking facilities, x-ray baggage inspection facilities, etc. these services to passengers are separately rendered by the respective airlines who discharge the service tax liability independently. Services such as air traffic services including flight information service, alerting services, air traffic advisory services, safety services, etc., are rendered to the airlines by the Airport Authority of India. Thus, we find that the collection of the 'users fee' from outgoing international passengers had no relation whatsoever to any services rendered by the appellants.(Para 3).

    Appeal allowed.

  • STO 2007 CESTAT 105
  • Service Tax: Airport services: Scope and liability: Appellants are carrying on various category of services and have been discharging service tax for storage & ware-housing, cargo handling and other services. In so far as the Airport service is concerned, they were entered into an agreement with M/s Air India and M/s Air India is collecting the service tax and remitting the same to the Revenue. Their contention is that the Board has clarified that there is no service tax leviable on the rental/lease charges received by them. Board's Circular No. 80/10/2004-S.T., dated 17-9-2004 pertaining to non-levy of service tax on rental/lease charges is relevant in the matter. (Para 1).

    Interim stay granted.

  • STO 2006 CESTAT 240
  • Service Tax: Airport Services: Taxable value: From the judgment of Kerala High Court's that the collection of Rs. 500/- per passenger has been held to be illegal and therefore, the appellants have stopped collecting this fee. The Service Tax of all other aspects under the Airport Charges are being paid by them, which is not in challenge in the impugned order. In terms of the Kerala High Court's judgment, the collection of fee has been held to be not as services to the passengers. Prima facie, the appellants have raised a strong case on merits in their favour.(Para 4).
    Pre-deposit waived.

     
     

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