The Supreme Court has ruled that the Airports Authority of India (AAI) is liable to pay service tax on services provided in relation to handling of export cargo at airports, dismissing the Authority’s appeal challenging earlier orders of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
The bench of Justices Pankaj Mithal and Justice Prasanna B. Varale upheld the Delhi Service Tax Commissioner’s 2010 order and subsequent CESTAT ruling that classified the services under “Airport Services” with effect from September 10, 2004, making them taxable under the Finance Act, 1994.
The AAI, a Government of India body under the Ministry of Civil Aviation, manages airports across the country. As part of its functions, it handles cargo, including export consignments, involving activities such as unloading, carting, X-ray checks, and export packing — from acceptance of cargo until it is loaded onto aircraft.
The Service Tax Department had raised a demand for the period October 1, 2003, to March 31, 2007, initially treating such activities as “Storage and Warehousing Services” until September 9, 2004, and thereafter under “Airport Services.”
Challenging this, the AAI argued that export cargo handling is specifically excluded from the definition of “Cargo Handling Services” under Section 65(23) of the Finance Act, 1994, and hence not taxable.
The Court rejected AAI’s arguments, clarifying that Section 65 merely defines various terms, including “cargo handling service,” and its exclusion of export cargo does not automatically exempt such services from taxation. Section 66, the charging section, levies service tax on all “taxable services” defined under Section 65(105). Sub-clause (zzm) of Section 65(105), introduced on September 10, 2004, explicitly covers any service provided by the Airports Authority or any other person at an airport or civil enclave.
Thus, once “airport services” became a taxable category in 2004, all services rendered at airports — including export cargo handling — were liable to service tax.
The Court also dismissed reliance on government circulars by AAI, holding that circulars cannot override express statutory provisions.
The Supreme Court concluded that CESTAT and the Service Tax Commissioner were correct in treating AAI’s export cargo handling as taxable “airport services” from September 10, 2004.
Accordingly, the appeal was dismissed as lacking merit, affirming the tax liability on AAI for the disputed period.
Case Details
Case Title: Airports Authority Of India Versus Commissioner Of Service Tax
Case No.: CIVIL APPEAL NO. 17405/2017
Date: September 23, 2025
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