The Supreme Court on Monday dismissed an appeal by the Airports Authority of India (AAI) challenging a service tax levy on its export cargo handling operations. A bench of Justice Pankaj Mithal and Justice Prasanna B. Varale ruled that the broad wording of the Finance Act leaves no room to exclude these services, even though export cargo is carved out from the “cargo handling” definition.
Background
AAI, a central government body managing airports across the country, faced a tax demand for services provided between October 2003 and March 2007. The Delhi Service Tax Commissioner had earlier confirmed liability first under “Storage and Warehousing” and, after 10 September 2004, under the category of “Airport Services.” AAI argued that handling export cargo-activities like unloading, carting, X-ray and export packing-was explicitly excluded under Section 65(23) of the Finance Act, which defines “cargo handling service.”
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Court’s Observations
The bench heard senior advocates Y. K. Kapur for AAI and Nisha Bagchi for the Service Tax Department. Justice Mithal noted that Section 65 “is not the charging section but a provision defining various terms,” stressing that exclusion from one definition does not automatically remove liability elsewhere.
The judges turned to Section 66, the charging provision, which imposes service tax on “taxable services” defined under Section 65(105). Crucially, sub-clause (zzm), inserted in September 2004, taxes “any service provided to any person by the Airports Authority or by any other person in any airport or civil enclave.”
“The phrase is wide enough to cover any kind of service provided… in any airport,” the bench observed, making it clear that all AAI services, including export cargo handling, are taxable. Circulars cited by AAI to support exemption were brushed aside as “merely circulars and cannot override the express statutory provisions.”
Decision
Concluding that the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) committed no error, the Supreme Court dismissed AAI’s appeal. “The services rendered by the Airports Authority to any person in any airport are in the nature of taxable service,” the bench held, affirming the tax liability from 10 September 2004 onwards. Pending applications, if any, were disposed of.
Case: Airports Authority of India vs. Commissioner of Service Tax
Date of Judgment: 23 September 2025
