Supreme Court Dismisses Airports Authority’s Appeal | Export Cargo Handling Services Liable to Service Tax Under Finance Act
Kiran Raj
The Supreme Court Division Bench of Justice Pankaj Mithal and Justice Prasanna B. Varale dismissed an appeal by the Airports Authority of India (AAI) challenging the levy of service tax on services related to handling export cargo. The Court held that although “handling of export cargo” is excluded from the definition of “cargo handling service” under Section 65(23) of the Finance Act, 1994, such activities nevertheless fall within the ambit of “taxable services” under Section 65(105)(zzm), introduced with effect from September 10, 2004. Consequently, AAI’s services at airports remain liable to service tax.
The matter arose from a dispute concerning the levy of service tax on services rendered by the Airports Authority of India (AAI), a Government of India organization under the Ministry of Civil Aviation, engaged in managing airports across India and registered with the Service Tax Department. In the course of its operations, AAI handled cargo at airports, including export cargo, which involved unloading, carting, X-ray, export packing, and related activities. These services were provided from the time cargo was accepted for shipment until it was placed on the aircraft.
The Commissioner (Adjudication), Service Tax, Delhi, by order dated 17 March 2010, confirmed service tax liability on AAI for the period 1 October 2003 to 31 March 2007. Liability was determined under the category of “Storage and Warehousing Service” up to 9 September 2004 and under “Airport Services” with effect from 10 September 2004.
AAI challenged this order before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which, by order dated 1 March 2017, confirmed the liability under “Airport Services” from 10 September 2004 onwards. Dissatisfied, AAI filed a civil appeal under Section 35L of the Central Excise Act, 1944, before the Supreme Court.
AAI contended that the services in question related exclusively to handling of export cargo, which was excluded from “cargo handling service” as defined under Section 65(23) of the Finance Act, 1994. The appellant relied on the proviso to Section 65(23) to argue that such services were not covered within taxable service under Section 65(105). The respondent maintained that services provided by AAI in any airport were squarely covered under Section 65(105)(zzm) once introduced on 10 September 2004, and thus liable to service tax.
The Court recorded that “Section 65 of the Act is not the charging section but a provision defining various terms in connection with the service tax.” It stated that “Sub-section (23) of Section 65 of the Act simply defines ‘cargo handling service’… but would not include handling of export cargo.” The Court clarified that the said exclusion did not determine the taxability of services.
It observed: “In order to examine whether the services rendered by the appellant at the airport in handling the export cargo are exempted from service tax, it would be prudent to first refer to Section 66 of the Act, which is the charging section.” Section 66 was noted to levy service tax at twelve per cent on taxable services, including those under sub-clause (zzm) of Section 65(105).
The Court further stated: “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.” It held that “whatever services are provided by the Airports Authority in any airport falls under ‘taxable service’ in view of sub-clause (zzm).”
The Court also observed: “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.” It recorded that with the introduction of sub-clause (zzm) from 10 September 2004, “any kind of services whether in respect of export cargo provided by the Airports Authority to any person… would be taxable service.”
Finally, addressing the appellant’s reliance on circulars, the Court stated: “The various circulars relied upon… are of no avail, as they are merely circulars and cannot override the express statutory provisions.”
The Court stated: “Accordingly, we are of the opinion that the CESTAT or the Authorities below have not erred in taxing the services rendered by the appellant in relation to export cargo as taxable service under sub-clause (zzm) of Sub-section (105) of Section 65 of the Act with effect from 10.09.2004.”
“The appeal, as such lacks merit and is, accordingly, dismissed. Pending application(s), if any, shall stand disposed of.”
Case Title: Airports Authority of India v. Commissioner of Service Tax
Neutral Citation: 2025 INSC 1141
Case Number: Civil Appeal No. 17405/2017
Bench: Justice Pankaj Mithal, Justice Prasanna B. Varale
