1 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 483   OF 2011 [Arising out of SLP (C) No. 26577 of 2009]

P.C. Paulose, M/s. Sparkway Enterprises ….Appellant

Versus

Commissioner of Central ...Respondent Excise & Customs

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

2 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

3 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

4 are extracted hereinbelow: -

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:  ………………………………………………………………

5 ………………………………………………………………

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.  ……………………………………………………………… ………………………………………………………………

6 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 conspicuous pl inside the licensed  premises.  ……………………………………………………………… …………………………………………………………”

7 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 therefrom  

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

8 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

9 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

10 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

11 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.

12 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

13 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

14 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.

15 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

16 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.

1.

Consequently,  we  find  no  merit  in  this  appeal  and  the  same  is  

dismissed without any order as to costs.

 ..........................................J        [Dr. Mukundakam Sharma ]

............................................J

17        [ Anil R. Dave ]

New Delhi, January 13, 2011.