P.C. Paulose, M/s.
Sparkway Enterprises Vs Commissioner of Central Excise & Customs
JUDGMENT
Dr. MUKUNDAKAM
SHARMA, J.
1. Leave granted.
2. The issue that falls
for consideration in this appeal is whether the appellant, who is a licencee,
could be held liable for payment of service tax when actually the service
provided by them could and should be said to be provided by the Airport
Authority of India (for short "AAI"). It was contended on behalf of
the assessee that the role of the licensee-appellant was the role of an agent
and was therefore limited to collecting of fees for the services rendered by
AAI. In order to answer the aforesaid issue it would be necessary to set out
certain basic facts giving rise to the aforesaid issue.
3. The AAI entered into
a licence agreement with the appellant by which the appellant was entrusted
with the responsibility and the activity of collecting airport admission ticket
charges on behalf of AAI Limited at Karipur Airport, Calicut. As per the said
agreement the appellant was permitted to collect Rs. 50/- per visitor as
airport admission ticket charges for which the appellant was required to pay an
amount of Rs. 2,66,797/- per month as licence fee.
4. As per the aforesaid
agreement the appellant was collecting the admission ticket charges as
mentioned above for the period from 10.09.2004 to 31.03.2005. Some of the
relevant terms and conditions of the said licence agreement which would have a
bearing to the facts and circumstances of the present case are extracted herein
below: -
5. "Licence
Agreement
Subject
------- AAT Contract ITB
This Agreement made
the 2nd day of April of Two thousand four between the Airports Authority of
India ......... ................................................... ........................................................................
Whereas the Authority
is entitled in `Law' to grant licence at its Calicut Airport for the purpose of
Airport Admission at ITB so as to provide amenities and facilities to the
passengers and visitors at Airport and is in possession of space, more fully
described in the plan annexed to this agreement, even after referred to as the
premises.......................................................................
.........................................................
Now, therefore, this
indenture witnesseth:
...........................................................................................................................................................
4. That the Licensee
shall pay all rates, assessment, out goings and other taxes as leviable on the
Licensee in `Laws'.
................................................................................................................................................
9. That the Licensee
shall equipped himself with all necessary permits, licenses and such other
permissions as may be required under law in force at any time with regard to
the operation of the Subject licence. 10. That the Licensee shall maintain such
regular and proper account books along with other supporting documents
regarding sales effected by the Licensee in the said premises and said
accounts/documents shall all the times be kept open for inspection by Authority
in such manner as may be prescribed. The Licensee shall provide to the
Authority, if so required by the Authority, Statements of audited Accounts in
such manner and within such period as the Authority may prescribe.
........................................................................
........................................................................
12. That Authority
shall provide bare space for the subject services and other expenses shall be
incurred by the Licensee. However, provisions of electricity, water and drainage
connections, as the case may be, if so required, for the smooth operation of
the services shall be provided by the Authority.13. All the times during the currency
of the licence agreement, it shall be the responsibility of the licensee to obtain
proper fire insurance coverage including theft and burglary in respect of all
the movable and immovable assets stored or used in the licensed premises and authority
shall not be responsible for any loss or damage caused to the licensee on any
accounts whatsoever.14. That Licensee shall operate the subject facility by charging
the rate from users, as may be approved in advance by the Authority. Licensee
shall exhibit the said approved charges at a conspicuously inside the licensed premises.
.................................................... "
1.
It
is evident from the aforesaid terms and conditions of the agreement that the
appellant was granted licence by AAI to collect the admission ticket charges so
as to provide amenities and facilities to the passengers and visitors at the
Airport. Under the said agreement, the appellant was also required to pay all
rates, assessment, out goings and other taxes as leviable on the Licensee as
per law. It is also clear there from that AAI has only provided bare space and
all expenses for providing services to passengers / visitors are to be borne by
the appellant.
2.
As
per Clause 105 (zzm) of Section 65 of Finance Act, 1994 `taxable service' means
any service provided to any person, by Airport Authority or any person
authorized by it, in an Airport or a Civil Enclave. As per Clause (3d) of
Section 65 of the Finance Act, 1994 `Airport Authority' means AAI constituted under
Section 3 of the Airports Authority of India Act, 1994 and also includes any
person having charge of management of an airport or a civil enclave.
3.
The
Central Board of Excise and Customs by issuing a circular No. 80/10/2004 ST
dated 17.09.2004 stated by way of clarification on the scope of service tax on
airport services by making it clear that services provided in an airport or
civil enclave to any person by AAI or by a person authorized by it or any other
person having charge of management of an Airport are taxable under the
aforesaid category. On the satisfaction that the appellant was required to pay
service tax on airport services rendered by it under the aforesaid provisions
as `authorized person' of AAI at Karipur Airport, Calicut for the period from 10.09.2004
to 31.03.2005 a show cause notice was issued to the appellant demanding service
tax amounting to Rs. 1,80,845/- and education cess amounting to Rs. 3,617/-. There
was also a proposal to demand interest under Section 75 of the Finance Act,
1994 on the above service tax and education cess as well as penalty under
Section 76 of the Finance Act, 1994.
4.
On
receipt of the aforesaid show cause notice, the appellant submitted a reply
before the original authority contending inter alia that the Airport Authority
only is responsible for the collection of service tax as the appellant was not
permitted to collect the service tax from the public. It was also contended that
the implementation of the service tax and responsibility of the collection of
service tax was that of AAI as the principal service provider of the Airport
and that the appellant was only authorized to collect the prescribed admission
charges and remit the fixed licence fees to AAI.
5.
The
adjudicating authority considered the entire matter and after careful
consideration of the reply of the appellant and after giving a hearing to the
appellant confirmed the demand of service tax of Rs. 1,64,106/- and education
cess of Rs. 3,282/- with interest under Section 75 of the Finance Act, 1994.
6.
Being
aggrieved by the said order, appellant filed an appeal before the Commissioner
of Central Excise & Customs (Appeals), Cochin. The Commissioner (Appeals),
however, dismissed the said appeal, aggrieved by which, the appellant filed
second appeal before the Customs Excise & Service Tax Appellate Tribunal
[for short `CESTAT'], South Zonal Bench, Bangalore. The Tribunal, allowed the
appeal filed by the appellant by holding that the appellant is only a
collecting agent and therefore the liability to pay the service tax rest on AAI
which is the actual service provider.
7.
Being
aggrieved by the said judgment and order passed by CESTAT, the department filed
Central Excise Appeal No. 28/2008 before the Kerala High Court. By the impugned
judgment and order the High Court allowed the appeal with a direction to the
original authority to verify whether AAI has paid service tax on the admission
tickets during the relevant period and, if in case, AAI had paid the said
service tax, the appellant would stand exonerated from the liability;
otherwise, service tax would be recovered from the appellant as per the
provisions of the Act. Being aggrieved by the aforesaid impugned judgment and
order of the High Court the present appeal was filed by the appellant on which
we heard the counsel appearing for the parties.
8.
We
have already set out the issue which falls for our consideration in the present
appeal. In our opinion as to whether or not the appellant is a service provider
and, therefore, liable to pay the service tax rest on the interpretation of the
aforementioned circular and also the aforesaid provisions which are already referred
to hereinbefore.
9.
The
licence agreement clearly stipulates that AAI is entitled in law to grant
licence at its Calicut Airport for the purpose of airport admission so as to provide
amenities and facilities to passengers and visitors at the Airport and that the
licensee, i.e., appellant, has agreed under the licence agreement to render such
services to AAI on the terms and conditions mentioned in the said licence
agreement. One of such stipulations was that the licensee would pay all rates, assessment,
out goings and other taxes as leviable on the licensee in laws.
10.
Another
responsibility that vested on the licensee was to maintain regular and proper
account books along with other supporting documents regarding sales effected by
the licensee in the said premises which could be inspected by AAI in such
manner as may be prescribed. The licensee was also responsible under the licence
agreement to operate the subject facility by charging the rate from users, as
may be approved in advance by AAI.
11.
Albeit,
it is true that the appellant deposits a licence fees of Rs. 2,66,797/- per
month to AAI but it collects the required fees from the users of the facility
and provide all facilities to such customers. Section 65 Clause 105(zzm) of
Finance Act, 1994 defines `taxable service' to mean any person, by airports authority
or any person authorised by it, in an airport or a civil enclave. It is thus
crystal clear that the appellant being a person authorized by AAI to provide
service in express terms and conditions, it becomes liable to pay such tax as
it was an authorized person to provide taxable service and collect the admission
ticket charges on a contract basis.
12.
Under
the terms and conditions set out hereinbefore of the agreement the appellant is
authorized to provide all the services as mentioned therein and, therefore, as
per the statutory definition the appellant steps into the shoes of AAI for the
service provided on the basis of the authorization and becomes liable to pay
such taxes in terms of the operation of Section 65 Clause 105 (zzm) of the
Finance Act, 1994.Consequently, we find no merit in this appeal and the same is
dismissed without any order as to costs.
..........................................J
[Dr. Mukundakam Sharma ]
..........................................J
[ Anil R. Dave ]
New
Delhi,
January
13, 2011.
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