TMI Blog2010 (4) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... Income from guest room, courtesy coach parking and surcharge on prepaid taxi - these charges are liable to service tax. Income from entry ticket charges and income from issue of commercial passes - these charges are charged by the appellant for restricting the entry to public in to the Airport. The said income is not in respect of any services rendered by the appellant as an Airport Authority. - this amount collected and shown as income could not be construed as services rendered and liable to service tax. - ST/428, 31/2007, 443 and 232/2008 - 701-704/2010 - Dated:- 1-4-2010 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. REPRESENTED BY : Shri R. Krishna Iyer, C.A., for the Appellant. Ms. Sudha Koka, SDR, for the Respondent. [Order per : M.V. Ravindran, Member (J)]. All these appeals are filed by the appellants against the following orders. Appeal Nos. (1) ST/428/07 Order-in-original No. 09/07/ST dated 17-9-2007 (2) ST/31/07 Order-in-original No. 18/2006-ST dated 30-11-2006 (3) ST/443/08 Order-in-original No. 7/2008/ST dated 19-6-2008 (4) ST/232/08 Order-in-appeal No. 37/2008-ST dated 26-2-2008 (5) ST/232/08 Order-in-appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 1994 airport has the meaning assigned to it in clause (b) of Section 2 of the Airports Authority of India Act 1994 (55 of 1994). As per clause (b) of Section 2 of the Airports Authority of India Act, 1994, airport means a landing and taking off area for aircrafts usually with runways and aircraft maintenance and passenger facilities and includes an aerodrome . Thus the definition of airport not only includes runways for landing and taking off but also includes the area of passenger terminal where facilities like security services, snacks etc. are provided. The passenger services provided by the airport like arrangement for postal facility, money exchange, insurance, telephone, guest house, restaurants, parking etc. are covered under taxable services. Central Board of Excise Customs vide Circular No. 80/10/2004-S.T., dt. 17-9-2004 has clarified that charges such as royalty, licence fees etc. collected by the Airports Authority of India (AAI for short) from other service providers at the airport such as ground handling, security, common user terminal service etc. are chargeable to service tax. On scrutiny of the Service Tax Returns furnished by M/s. CIAL it was noticed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, it follows that the appellant s service does not come within the definition of taxable service in Section 65 Clause (105) sub-clause (zzm) and therefore no service tax can be levied on the appellant and the levy and demand of service tax is without authority of law and is unconstitutional and void. (f) According to the learned Commissioner, under sub-section (3aa) of Section 1 of the Airport Authority of India Act, 1994 it has been enacted that the provision of the Act applies to Private airports in so far as it relates to providing air traffic service, to issue directions u/s 37 to them and for the purpose of chapter VA. The learned Commissioner has observed under the circumstances, it can be seen that the provisions of Airport Authority of India Act 1994 apply to the air traffic services provided by M/s. CIAL as well. It is also observed that as per Memorandum and articles of Association of Cochin International Airport Ltd. CIAL is a limited company registered under the companies Act, 1956 with manifold functions one among them being the air traffic services provided by it. Hence it can be seen that Cochin International Airport Limited is a company having charge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. (e) The service tax rules - also is applicable only to a person providing service. (f) The Gujarat High Court in the case of Addition Advertising v. Union of India (UOI) - 2006 (2) S.T.R. 228 (Guj.) = 1998 (98) E.L.T. 14 (Guj.) while holding that that levy of tax on advertising services is not unconstitutional, Observed that this is not a tax on any profession, trade, calling or employment, but in respect of service rendered. If there is no service, there is no tax. It was further held that the tax is not on advertisement , but on the services rendered with reference to the advertisement and there is a clear distinction between the advertisement service and advertisement . (underline ours for emphasis) From the above observations of the court also it is clear that service tax cannot be imposed in the absence of rendering of service. (g) Ministry s Letter F. No. B2/8/2004 TRU dated 10-9-2004 specifically clarifies that rental/lease charges collected are not income liable for levy of service tax as the activity of letting out premises is not rendering a service. (h) It is submitted that in fact it is clear from exclusion of rental/lease charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortionate to the use of a patented device; in other words, a kind of excise. In some of its uses it is broader than rentals , and yet in other aspects rentals is a broader word than royalties. Rentals in their ordinary signification are not limited as royalties in their ordinary signification; that is something proportionate to the use of a patented device. Page 1696 Royalty has several meanings (1) percentages or dues payable to landowners for mining rights (2) sums paid for use of a patent (3) percentages paid to art author by a publisher on the sales of his book. Page 1696- Royalty is the most appropriate word to apply to rental based on the quantity of coal or other mineral that is or may be taken from a mine. (o) The learned Commissioner has observed that clarification issued by the Finance Ministry in F. No. 80/10/2004 dated 17-9-2004 (actually letter F. No. B2/8/2004 TRU dated 10-9-2004, 80/10/2004 is the circular issued by CBEC reproducing the said letter) clarified that Royalty, licence fee etc. are taxable and has reproduced the clarification in para 23 of the order. (p) It is submitted that even though it is true that circular No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant shall be paid monthly. (e) It is clear from the above that the amount paid to the appellant by Air India is a share of revenue from Air India towards ground handling operation. (f) It is also submitted that Since Service Tax has been collected and paid by Air India, it will tantamount to double taxation if the appellant is also required to pay Service Tax on amount received from Air India as royalty for ground handling charges received. 6. Royalty charges collected from Thomas Cook for providing exchange facilities (a) Appellant has submitted copy of the agreement with Thomas Cook. (b) It is submitted that the appellant is providing any service to Thomas Cook or receiving any service from them. The relationship between the appellant and Thomas Cook is not one of service provider and service recipient. (c) Following the decisions in Aviat Chemicals (P.) Ltd. v. CCE [1994-2006] STT 572 (Delhi - CESTAT), CCE v. Pinnacle Industries Ltd. [2006] 3 STT 324 (New Delhi - CESTAT), royalty charged could not be taken as a consideration for any service rendered. (d) It is also submitted that in circular No. 80/10/2004 - ST it is clarified that char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterate that circular recognizes the fact that all income received by airport does not fall under the category of airport services. (d) It is submitted that even though for accounting purpose, appellant have accounted this revenue under the head licence fee , these are nothing but rentals for the space or area allotted to the various parties for specific purposes. The license fee is fixed on the basis of the area allotted 4.6 License fee on Advertising : (a) The appellant has produced copy of the agreement with M/s. Daffodils Communications. The appellant has granted the advertisement rights to them to put up advertisement in sites on trolleys used in International and Domestic terminal buildings. (b) It is submitted that the observation of the learned commissioner that the these (advertisement) services are rendered for the facility of passengers, visitors etc. are against the facts. (c) The appellant is not rendering any services to the M/s. Daffodils communications but only providing space for advertisement. It is submitted that the requirements in Section 65(105) - viz Provision of service is not fulfilled. The appellant is not a service provider as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Hon ble Tribunals have expressed the view that the activity is space selling and therefore the decisions are squarely applicable to the appellant s case. 4.7 License fee Cargo agents building : The appellant has furnished copy of the agreement with M/s. Fair exports (I) Ltd. and it is clear from the agreement that the charges are for permission to the party for providing storage cum office space and housing services for cargo handling agents in the airport. It is submitted that the licence fee is apparently only rent for use of airport premises. The learned commissioner has observed since the services provided by the party is as per permission granted by the assessee under a licence and the services are in relation to cargo handling provided at the airport premises and as the airport is receiving licence fee in consideration of the above permission. Admittedly, the learned Commissioner has conceded that the consideration is for the permission and not for any service rendered to the party. The learned Commissioner also admits that it is not the appellant that is rendering services. It is submitted that merely because the party is using the rented premises for renderi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of agreement with Smt. Mary Thomas. No service is rendered by the appellant to the Telephone operators, the licence fee is only rent for use of airport premises. It is submitted that merely because the rent is fixed as a percentage of monthly bill, it cannot be held to be a taxable service. 4.14 License fee Vending machine : It is submitted that the contractor is permitted to set up vending machines in the airport. No service is rendered by the appellant, thus the licence fee is only rent for use of airport premises. 4.15 License fee Catering services : It is submitted that the contractor is permitted to provide catering within the airport premises. No service is rendered by the appellant to the party, the licence fee is only rent for use of airport premises. 19. License fee Facilitation counter : No service is rendered by the appellant from the person from whom fee is collected, the licence fee is only rent for use of airport premises. 4.16 Income from entry ticket charges : It is submitted that entry ticket charges is collected from non passengers for permission to entering into certain restricted areas. Fee is not levied for any services provided to them. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e returns filed or as assessed by the assessing authority. In the absence of any particular definition or explanation, the said term only means the value of taxable services as determined by the assessee in the returns filed. (b) It is submitted that following the decisions in the Hon ble High Court of Patna in Ranchi Club v. CIT (217 ITR 72), Hon ble Supreme Court in J.K. Synthetics Ltd. v. Commercial Taxes Officer (1994) 4 S.C.C. 276); (1994) (94 STC 0422) no interest can be levied on the additional amount which is not an admitted tax. (c) It is submitted that in Star India (P) Ltd. v. CCE - 2006 (1) S.T.R. 73 (S.C.) = (2005) 2 STT 274 (S.C.) it was held that liability to pay interest would arise only on default and is really in the nature of a quasi - punishment. 4.22 Penalty u/s 76 (Penalty for failure to collect or pay Service Tax) (a) It is submitted that this is not a case where there is absolute failure to collect pay tax. Service tax has been paid on the services which are included in the return. It is submitted that whether service tax is to be remitted on the royalty received from licence fee other income are debatable issues. The Appellant is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er authorities have erred in demanding service tax from the appellants as the entire amount of cess as recovered and indicated in the balance sheet as income is nothing but lease/rental charges. 6. He would draw our attention specifically to the CBE Circular 80/10/2004 dated 17-9-2004. It is also his further submission that the appellants have handed over the contract to perform entire ground handling service to M/s. Air India and M/s. Air India vide their certificate dated 28-1-2008 has clearly certified that they are discharging service tax liability on the services rendered by them. 7. Learned JCDR on the other hand would submit that services rendered by the appellants would fall under the category of Air Port Services. It is her submission that the agreement entered by the appellant with M/s. Air India, Thomas Cook, Atlas Jewellery and Bharat Petroleum would clearly indicate that the services which are to be rendered by the appellant are being rendered by somebodyelse. It is her submission that the said services even if rendered through another agency would fall under the category of services rendered by another person authorized. She would submit that the agreement produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g machine (10) catering services (11) facilitation counter 8.1 We now take up the issue of service tax liability on the royalty charges collected by the appellants from M/s. Air India for the services rendered by M/s. Air India at the Cochin International Airport. We have perused the agreement entered by the appellant with M/s. Air India. As per the said agreement we find that Air India has been given exclusive contract to perform ground handling services including passengers handling, ramp handling and cargo flight handling including loading of cargo etc. The appellant is required to provide facilities like runway for landing and takeoff, Security Services Passenger facilities etc. It is also seen that M/s. Air India is collecting service tax from various Airlines and are discharging service tax liability on such amounts collected by them for the services rendered by M/s. Air India. It is abundantly clear from the certificate dated 28th January 2008 issued by M/s. Air India which is reproduced herein below verbatim. DF/BS/CIAL/001 Date 28th January 2008 - CERTIFICATE - This is to certify that Air India has executed an agreement with Cochin International Airpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered view, the said agreement could clearly be classified as an agreement for lease or rent. On perusal of the agreement between the appellant and Thomas Cook Ltd., we find that the said agreement is for operation of foreign exchange counters within the airport enclave. It is seen that as a consideration for the licence granted, the said Thomas Cook pays a fixed amount of Rs. 5000/- as license fee and a further amount as percentage on gross foreign exchange turn over recorded by them in the Airport. It is also seen that this licence is for a specified period. From the agreement, it is seen that all the licensees are required to pay municipal rates and taxes and other statutory levies by the State or any other Authority under the law. 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. 9.2 On perusal of the records, we find that the licence fee charged by the appellant on advertising, cargo agency, car parking, space, shops, restaurant/snack bar, telephone opera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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