Supreme Court Dismisses Airports Authority's Appeal Against Service Tax Levy For Cargo Handling

The Supreme Court on Tuesday dismissed an appeal filed by the Airports Authority of India (AAI) challenging the levy of service tax on services rendered in handling export cargo, ruling that such services fall within the ambit of “taxable services” under the Finance Act, 1994.

A Bench of Justice Pankaj Mithal and Justice Prasanna B. Varale held that while “handling of export cargo” is excluded from the definition of “cargo handling service” under Section 65(23) of the Act, cargo handling service nonetheless qualifies as a “taxable service” in terms of sub-clause (zzm) of Section 65(105) was introduced with effect from September 10, 2004.

AAI, a government body under the Ministry of Civil Aviation, argued that services such as unloading, carting, X-ray scanning, and export packing provided to exporters should be exempt as per the statutory exclusion of export cargo handling. The Court, however, clarified that Section 65 deals only with definitions and not charging provisions. The charging section is Section 66, which explicitly levies service tax on all services covered under its sub-clauses, including airport services.

"The aforesaid sub-clause (zzm) is wide enough to cover any kind of service provided to any person by the Airport Authorities in any airport or a civil enclave. Therefore, whatever services are provided by the Airports Authority in any airport falls under “taxable service” in view of sub-clause (zzm).” the Court observed.

"The aforesaid definition of the taxable service is very wide and takes into its fold any kind of service that may be provided to any person by the Airports Authority in any airport. Accordingly, all kinds of services rendered by the Airports Authority in any airport are taxable services and are chargeable to service tax under Section 66 of the Act," the Court held.

Sub-clause (zzm) was introduced w.e.f. 10.09.2004. Hence, any kind of services whether in respect of export cargo provided by the Airports Authority to any person after inclusion of sub- clause (zzm) would be taxable service.

The judgment further emphasized that statutory provisions override departmental circulars, rejecting AAI's reliance on clarificatory circulars to claim exemption.

With this ruling, the Court upheld the decision of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), which had confirmed service tax liability on AAI for the period post-September 10, 2004 under the category of “Airport Services.”

The appeal was accordingly dismissed as devoid of merit.

Case : Airports Authority of India v. Commissioner of Service Tax

Citation : 2025 LiveLaw (SC) 933

Click here to read the judgment