In the case of Airports Authority of India v. Commissioner of Service Tax, Civil Appeal No. 17405 of 2017, decided on 23.09.2025, the Hon’ble Supreme Court examined whether export cargo handling services provided by the Airports Authority of India were liable to service tax under the Finance Act, 1994. The Court upheld the imposition of service tax, holding that such services fell squarely within the ambit of “taxable service” under Section 65(105)(zzm), read with Section 66 of the Act.
FACTS
AAI (hereinafter referred to as “the Appellant”), is a statutory authority constituted under the Airports Authority of India Act, 1994, engaged in the management and operation of airports across India. Among its various functions, the Appellant provides cargo handling services including loading, unloading, storage, and supervision of export consignments. The Department (hereinafter referred to as “the Respondent”) contended that such services were taxable under the category of “Airport Services” with effect from 10th September 2004, and accordingly raised a demand for service tax.
The Appellant, however, argued that handling of export cargo was expressly excluded from the definition of “Cargo Handling Service” under Section 65(23) of the Finance Act, 1994, and therefore could not be taxed. It was submitted that exports, being zero-rated activities, should not attract any service tax burden. The Respondent, on the other hand, maintained that once the taxable service of “Airport Services” was introduced by Parliament, all services provided by or on behalf of the airport authority within the airport premises, including cargo handling became taxable irrespective of their destination.
Aggrieved by this, the Appellant preferred the present appeal before the Hon’ble Supreme Court.
CONTENTION OF THE PARTIES
The Appellant contended that export cargo handling is excluded from the scope of service tax by virtue of Section 65(23), which defines “Cargo Handling Service.” It was argued that this exclusion, being a conscious legislative choice, must be respected and applied uniformly. The Appellant further submitted that the services rendered in relation to export goods are outside the taxable territory, and any tax thereon would undermine the zero-rating principle applicable to exports.
On the Contrary, the Respondent argued that the exclusion under Section 65(23) applies only to the specific category of “Cargo Handling Service,” and not to services provided by an airport authority under a distinct taxable entry. Once the Parliament introduced Section 65(105)(zzm), defining “Airport Services” to include any service provided by the Appellant or by any person authorised by it, all such services became taxable. The Respondent also asserted that circulars or trade notices cannot nullify a statutory charging provision.
DECISION AND FINDINGS
The Hon’ble Supreme Court observed that Section 65 only defines various expressions used in the Finance Act and cannot itself be read as a charging section. The liability to pay service tax arises under Section 66, which imposes tax on all taxable services defined under Section 65(105). Sub-clause (zzm) of Section 65(105), inserted with effect from 10th September, 2004, specifically brings within its fold “any service provided by Airports Authority or any person authorised by it in an airport or a civil enclave.
Accordingly, the Court held that the cargo handling activities of the Appellant, being performed within the airport area and for consideration, clearly fell within the ambit of “Airport Services.” The exclusion for export cargo under Section 65(23) was held to be confined only to that specific definition and could not be invoked to defeat the clear language of the charging provision under Section 65(105)(zzm).
The Court further held that administrative circulars cannot expand or restrict statutory provisions. Citing earlier precedents, it reiterated that while circulars may bind the departmental authorities, they cannot prevail over the law enacted by Parliament. The argument that the Respondent’s own circulars treated export cargo handling as non-taxable was therefore rejected.
The Court concluded that once the service in question squarely falls within a taxable category created by Parliament, exclusions from other categories cannot be imported to nullify that charge. Consequently, the cargo handling services rendered by the Appellant in respect of export consignments were held liable to service tax under “Airport Services.”
The Supreme Court upheld the orders of the lower authorities and confirmed that export cargo handling services provided by the Appellantare taxable under Section 65(105)(zzm), read with Section 66 of the Finance Act, 1994.
The Court thus reaffirmed that statutory definitions cannot control charging provisions, and exclusions applicable to one service category do not extend to another independently chargeable category.
AMLEGALS REMARKS
This judgment reiterates that tax liability must be determined based on the charging provision, not merely on definitional exclusions. The Hon’ble Supreme Court’s interpretation strengthens the principle that substance of the charging entry prevails over form, ensuring uniformity in service tax application.
For businesses and statutory authorities, the ruling underscores the need for careful classification and review of services post-legislative amendments, as exemptions under one head cannot automatically shield liability under another. This decision also serves as a reminder that departmental circulars cannot override statutory law, and compliance must always be anchored in the express language of the statute.
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