In a setback for the Airports Authority of India (AAI), the Supreme Court on Tuesday upheld a service tax demand of Rs 8.59 crore on fees collected by the airport regulator from airlines, cargo operators and exporters between 2003 and 2007.
A two-judge bench, comprising Justices Pankaj Mithal and Prasanna B. Varale, dismissed AAI's appeal, affirming the 2017 ruling of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Delhi. The apex court stated: "We are of the opinion that the authorities below have not erred in taxing the services rendered by the appellant in relation to export cargo as taxable service. The appeal as such lacks merit and is accordingly dismissed." The detailed written judgment is awaited.
Background of the Case
The dispute centred on whether fees charged by AAI for terminal handling, X-ray screening, packing and loading for export cargo were exempt as export services or taxable under "airport services" and "storage and warehousing".
Between October 2003 and March 2007, AAI levied charges on exporters, airlines and cargo operators for services including cargo handling, terminal facilities and security checks. While services linked directly to exports were generally exempt from service tax at that time, tax authorities argued that fees charged before September 2004 fell under "storage and warehousing services," and after that, under "airport services" introduced by the Finance Act, 1994.
Legal Journey
- 2010: Service Tax Commissioner in Delhi confirmed the ₹8.59 crore demand and imposed penalties, alleging suppression of facts.
- CESTAT 2017: Upheld most of the tax demand but removed penalties and narrowed the scope of liability.
- Supreme Court 2025: Rejected AAI's appeal, confirming the tax demand while the detailed judgment is awaited.
AAI had argued that it acted in good faith as a statutory public authority and that the fees should be exempt as part of export cargo handling. The apex court, however, upheld the interpretation of the tax authorities, emphasizing that these services fell under taxable categories and not exempt export services.
This ruling highlights that service tax liabilities on pre-GST era charges continue to have implications for government agencies and statutory bodies, reaffirming the tax authorities' powers to levy dues on historically collected fees.
CAclubindia
