Route Navigation Charges Not Taxable Under Airport Services; CESTAT Upholds Tax on Terminal Landing Charges

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi Benchhas partly allowed an appeal filed by the Airport Authority of India (AAI), holding that Route Navigation Facility Charges (RNFC) are not liable to service tax under the category of “Airport Services,” while upholding taxability on Terminal Navigation Landing Charges (TNLC). The Bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that en-route communication stations are positioned at intervals across Indian territory. These stations are manned by separate personnel not necessarily deployed within airport or civil enclave areas. RNFC services are rendered throughout the flight path, not exclusively within airport limits. The dispute arose from a service tax demand of over ₹308 crore raised against AAI for the period from September 10, 2004 to May 31, 2006. The department sought to levy service tax on Route Navigation Facility Charges (RNFC), Terminal Navigation Landing Charges (TNLC) and certain miscellaneous income. The demand was confirmed by the Principal Commissioner in a de novo adjudication order dated May 27, 2016, following an earlier remand by the Tribunal. AAI challenged the confirmation of service tax on these components, contending that not all services in question were rendered “within an airport or civil enclave,” as required under Section 65(105)(zzm) of the Finance Act, 1994. The central legal issue was whether RNFC services were provided “in an airport or civil enclave” so as to fall within the taxable category of airport services. The Tribunal relied on its earlier remand directions, which had clarified that navigational services would be taxable only if provided entirely by personnel deployed within airport or civil enclave premises. RNFC covers communication, navigation and surveillance services provided to aircraft while flying through Indian airspace, including overflying international flights that do not land in India. These services are facilitated through aeronautical communication stations stationed across the country, often located outside airport premises. Rejecting the adjudicating authority’s conclusion that the entire service was provided within airport premises, the Bench held that such findings were “perverse” and unsupported by evidence. Accordingly, the Tribunal set aside the service tax demand on RNFC. In contrast, the Tribunal upheld the levy of service tax on Terminal Navigation Landing Charges (TNLC). TNLC relates to services provided during the landing phase of aircraft operations, including Air traffic control, Approach aids and use of airport infrastructure. The Bench noted that these services are intrinsically connected with landing operations and are necessarily rendered within airport or civil enclave premises. The Tribunal drew support from the Supreme Court’s decision in Airport Authority of India v. Commissioner of Service Tax (Civil Appeal No. 17405 of 2017, decided on 23.09.2025), where the Apex Court held that Section 65(105)(zzm) is wide enough to cover any service provided by airport authorities within an airport. Accordingly, the demand on TNLC was upheld, but the matter was remanded to the adjudicating authority solely for quantification. The department had also levied service tax on ₹9.37 crore categorized as “miscellaneous income,” including profit on sale of fixed assets, interest on staff advances, sale of scrap. The Tribunal found that these receipts had no nexus with the provision of taxable services and were not consideration for any service rendered. Accepting AAI’s contention, the Bench held that such income was not exigible to service tax and set aside the demand under this head. On the issue of limitation, AAI argued that the assessment for the period September 2004 to February 2005 was provisional and that the demand was time-barred. The Tribunal noted that provisional assessment was permitted only for March 2005. ST-3 returns for the relevant period were filed on July 26, 2005. The show cause notice was issued on July 18, 2006. Relying on the decision of the Patna High Court in Sukhmani Carrying Corporation v. Principal Commissioner, CGST, Patna, the Tribunal held that the relevant date for limitation is the date of filing of return. Since the show cause notice was issued within one year from the filing of returns, it was held to be within the normal limitation period. Case Details Case Title: Airport Authority of India Versus Commissioner of CGST- Delhi Citation: JURISHOUR-17-CESTAT-2026(Del) Case No.: Service Tax Appeal No.52465 Of 2016 Date: 18.02.2026 Counsel For Appellant: Prakash Kumar Sinha Counsel For Respondent: Mahboob Ur Rehman Click Here To Read Order Read More: Delhi High Court Directs HDFC Securities to Approach PMLA Appellate Authority

Route Navigation Charges Not Taxable Under Airport Services; CESTAT Upholds Tax on Terminal Landing Charges

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