Hans Enterprises vs Airports Authority of India and Others

A.K. Sikri, C.J.—Of these petitions being listed together, some have been transferred to this court under orders of the apex court. After hearing the counsel for the parties, we find that all the petitions can be disposed of by this common order. Each of the petitioners has entered into an agreement with the respondent-Airports Authority of India (AAI). The genesis of these petitions is in insertion of clause (zzm) in section 65(105) of the Finance Act, 1994, with effect from April 1, 2004. Section 65(105) defines taxable service. Gause (zzm) has included within the definition of taxable service, the service provided:

To any person, by airports authority or by any other person, in any airport or a civil enclave:

Provided that the provisions of section 65A shall not apply to any service when the same is rendered wholly within the airport or civil enclave.

The service tax authorities took the view that the agreements entered into by each of the petitioners with the respondent-AAI attracted payment of service tax under the said clause (zzm). Accordingly notice was sent to the respondent-AAI to pay the service tax.

Each of the petitioners denies applicability of service tax qua the agreement entered into by each of them with the respondent-AAI. During the hearing it has transpired that in most of the cases it was the stand of the respondent-AAI also that no service, tax was payable qua the said agreements/transactions. However since service tax was demanded by the service tax authorities from the respondent-AAI, the respondent-AAI in turn raised demand on. the, petitioners which has resulted in filing of these petitions.

Though in some of the petitions challenge to the vires of the statutory provision has been made (and that is how the petitions are before us) but what we find after the hearing is that the challenge is to the applicability rather than to the vires. It is the contention of the petitioners that no service is being rendered by the respondent-AAI to them or by them at the airport and thus no service tax is leviable on the transaction/agreement between them and the respondent-AAI.

However the Commissioner; Service Tax has completed the assessment and held the respondent-AAI liable for payment of service tax. The respondent-AAI. has not accepted that decision and has filed an appeal which is pending adjudication.

Besides the aforesaid dispute, there is also a dispute, as to who is to bear the service tax, if ultimately found applicable.

We are however of the view that since the petitioners as well as the respondent-AAI, both are challenging the very leviability of service tax on the subject transaction and further since the appeal against the order levying the service tax is pending consideration and in adjudication of which appeal, the questions as raised herein will necessarily have to be decided, and yet further since the said appellate for a is the appropriate for a to decide the said questions/it is not necessary for the same to be decided by us.

The petitioners have however contended that they are not parties in the said appeal proceedings. The same however does not pose any impediment. The respondent-AAI has no objection if each of the petitioners is permitted to intervene in the said appeal and to oppose the applicability of clause (zzm) and leviability of service tax on their respective transactions with the respondent-AAI. The service tax authorities who are also respondents in these petitions also have no objection.

We accordingly direct that each of the petitioners herein shall be allowed to join the appeal proceedings and shall be heard therein. We direct the respondent-AAI to inform to each of the petitioners the next date of hearing in the said appeal and to also furnish such other details as may be required by the petitioners.

As far as the dispute inter se the petitioners and the respondent-AAI, in the event of it being ultimately held that service tax is leviable, we find that the agreements of each of the petitioners with the respondent-AAI contain an arbitration clause.

Another question which arises is as to the interim arrangement, in as much as in some cases the respondent-AAI has already recovered the service tax from the petitioners, in some cases the respondent-AAI is holding security deposit/bank guarantees furnished by the petitioners and in some others the demand of the respondent-AAI for service tax is outstanding. We are, herein below recording in a tabular form, the position in each of the cases.

The petitions are disposed of with the aforesaid directions. No order as to costs.