By TIOL News Service

NEW DELHI, MAR 06, 2017: AGAINST the appellants who are engaged in managing various airports in India, service tax liability of Rs.8,59,06,238/- along with penalties is confirmed under the category of "storage and warehousing service" upto 09/09/2004 and under "airport services" w.e.f. 10/09/2004.

The appellants had contended in adjudication that the services sought to be categorized under these tax entries were actually "cargo handling services" and as they relate to export cargo they are excluded from tax liability.

Before the CESTAT, the appellant argues on merits as well as on the point of limitation. The AR justified the demand.

After hearing both sides, the Bench observed thus -

Merits:

+ Appellants are basically engaged in various composite activities starting from receipt, shifting, handling, loading, packaging in suitable manner, security X-ray, scanning and loading of cargo for outward movement by aircraft. These activities are not relating to storage and warehousing of cargo. To complete these processes some time is taken and during this time, the cargo is held by the appellant in a secured area. The cargo brought by exporters are not for storage or warehousing in the airport. The cargo is brought for shipment and the shipment happens at the earliest available opportunity. Till the shipment, the cargo is held for a short duration by the appellant. During this duration, various activities to make the cargo fit for shipment is undertaken. As such, we are in agreement with the appellant that they are not involved in providing storage and warehousing service with reference to the cargo. As such, there is no tax liability under this tax entry for the appellant upto 09/09/2004.

+ With the introduction of airport service w.e.f. 10/09/2004, we find that the appellants are correctly liable to tax under this tax entry. While cargo handling may be specific with reference to services rendered in connection with cargo, 'airport service' is also specific to the extent that this service can be rendered only by airport authority or any other person in a designated airport or a civil enclave. The service is area specific. …, we are of the opinion that the services rendered by the appellant are taxable under the category "airport service" w.e.f. 10/09/2004.

Limitation& Penalty:

+ The appellants are a Government of India organization and there could be a general, rebuttable, presumption regarding non-existence of a malafide intent to evade tax. The Revenue has to rebut such presumption with specific evidences. The appellant being an airport authority rendering airport services is manifestly known to tax authorities.

+ The ingredients for invoking extended period of demand have not been convincingly brought out in the impugned order and as such the demand against the appellant should be restricted to the normal period only.

+ On the same reasons penalty imposed on the appellant under Section 77 and 78 of the Finance Act, 1994 set aside.

The appeal was disposed of.

(See 2017-TIOL-697-CESTAT-DEL)