By TIOL News Service

MUMBAI, AUG 11, 2014: THIS is a Revenue appeal against the order of the Commissioner(A) setting aside the demand of service tax raised against the respondent for the period September, 2004 to May, 2005 under the category "Manpower supply services". The services undertaken by the respondent is that of supply of manpower for cleaning of the aircrafts.

Incidentally, the lower appellate authority has confirmed the ST demand of Rs.2,70,249/- for the period June 2005 to September, 2005.

It is the contention of the Revenue that the term "Airport services" as defined in section 65(105)(zzm) includes any service provided or to be provided to any person by the airports authority or by any other person authorised by it, in any airport or civil enclave. And that the said services of manpower supply would be leviable to tax under "airport services" both prior to and with effect from 01.06.2005 and, therefore, setting aside of the service tax demand of Rs.5,42,512/- for the period prior to 01.06.2005 is incorrect in law.

While explaining the coverage of the new services like "Airport Services" that were subject to service tax levy by the Finance Act, 2004, the Board in paragraph 5 of the Circular 80/2004, dated 17.09.2004 mentioned -

Airport services: 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 are 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, as the activity of letting out premises is not rendering a service.

The Bench adverted to the underlined portion above and observed -

++ Service tax in India prior to 2012 was selective in scope of levy and all activities were not taxed, but only taxable services as defined in law were liable to tax. Even when "Airport service" was introduced, a service which was not a taxable service was not liable to service tax under the "Airport Service" if the said service performed outside the airport or civil enclave was not taxable.

++ From the underlined portion above, it is clear that if any activity is not taxable service as defined in law, even if it is rendered within the airport, it would not be taxable. That is why the renting of immovable property in an Airport prior to 01.06.2007 was not taxable under the "Airport Services" since "renting of immovable property" was not a taxable service. Similarly, there are other services performed in the Airport, such as Porterage Services, Escort services, Wheelchair Services and so on. It is not the case of the Revenue that they are collecting Service Tax on these services rendered in the Airport as these are not taxable services otherwise.

++ On the same logic, supply of manpower services cannot be taxed prior to 01.06.2005 under the category of Airport Services.

Holding that the Revenue has not made out a case for grant of stay, the stay petition was dismissed as being devoid of merits.

In passing: The JS(TRU) in his letter F.No.B1/ 6 /2005-TRU, dated : July 27, 2005 while elucidating about the issues pertaining to Service Tax emanating in the Budget 2005-2006 mentioned -

"22. Manpower Recruitment Service

22.1 Prior to 16/6/2005, service tax was leviable on services provided by manpower recruitment agencies in relation to recruitment of manpower. Amendments have been made to levy service tax on temporary supply of manpower by manpower recruitment or supply agencies.

22.2 A large number of business or industrial organizations engage the services of commercial concerns for temporary supply of manpower which is engaged for a specified period or for completion of particular projects or tasks. Services rendered by commercial concerns for supply of such manpower to clients would be covered within the purview of service tax."

Also see : Airport Retail Pvt Ltd Vs UoI 2014-TIOL-1292-HC-DEL-ST.

(See 2014-TIOL-1481-CESTAT-MUM)