Supreme Court: Cargo Handling of Export Goods by Airports Authority Liable to Service Tax Under “Airport Services”

The Airports Authority of India was registered with the Service Tax Department for payment of service tax. It handled export cargo at various airports, including activities such as unloading, carting, X-ray, packing, and related logistics. The Commissioner (Adjudication), Service Tax, Delhi, vide order dated 17 March 2010, confirmed service tax liability for the period from 1 October 2003 to 31 March 2007, treating the services as taxable under “Storage and Warehousing” up to 9 September 2004 and as “Airport Services” thereafter.

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), by order dated 1 March 2017, upheld the liability under the category “Airport Services” with effect from 10 September 2004. The Airports Authority contended before the Supreme Court that its services related to handling of export cargo were excluded under Section 65(23) of the Finance Act, 1994, which specifically excludes handling of export cargo from the scope of “cargo handling service.”

Issue Raised: Whether handling of export cargo by the Airports Authority of India at airports is excluded from service tax as “cargo handling service,” or chargeable as “Airport Services” under Section 65(105)(zzm) of the Finance Act, 1994.

SC’s Ruling: The Supreme Court dismissed the appeal, holding that the exclusion of “export cargo” from the definition of “cargo handling service” does not exempt it from taxation under another taxable category, namely, “Airport Services.” The Court explained that Section 65 merely defines taxable services, while Section 66 is the charging section imposing service tax on such services.

The Sub-clause (zzm) of Section 65(105) covers any service provided by the Airports Authority or any other person in an airport or civil enclave. This includes handling of export cargo. Though handling of export cargo is excluded from “cargo handling service,” it still falls under “Airport Services” once that category was introduced from 10.09.2004.

The Court emphasized that liability to service tax depends on the charging section and taxable categories defined thereunder, not merely on the exclusions under definitional clauses. The Court rejected reliance on departmental circulars, stating that executive instructions cannot override clear statutory language.

The Bench concluded that services rendered by the Airports Authority in respect of export cargo after 10 September 2004 constitute taxable “Airport Services,” and the authorities were justified in confirming service tax liability.

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