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Judgment
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 counsels 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, w.e.f. 1st April, 2004. Section 65 (105) defines taxable service. Clause (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 and 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 fora is the appropriate fora 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.
Sr. No.
Writ Petition Number
Particulars
1.
2.
15095/2006
15096/2006
The respondent AAI had awarded the contract to the petitioners for collection and disposal of garbage from IGI Airport, Delhi. The said contracts have already come to an end. Vide interim order in these petitions the respondent AAI was restrained from taking any coercive steps against the petitioners for collection/recovery of service tax. However the respondent AAI is withholding the security deposit in the form of FDRs of the petitioners. The interest of the respondent AAI is thus fully safeguarded. The petitioners are however directed to keep the FDRs renewed from time to time. In the event of the service tax being ultimately levied, the dispute as to who is to bear the same shall be resolved by arbitration. The parties shall be entitled to seek interim measures in the said arbitration proceedings. The petitioners to within one month also file affidavits undertaking to this Court to pay the service tax amount if ultimately found due to the respondent AAI.
3.
532/2007
The petitioner had entered into an agreement with the respondent AAI for operating a Jewellery Shop in the Transit Lounge, Terminal-II, IGI Airport, Delhi and has already paid the subject service tax for the period 1.4.2006 to 1.1.2007 to the respondent AAI, though under protest. There is no dispute that in the event of the service tax ultimately held to be leviable, the liability is of the petitioner. There is thus no need for arbitration. However in the event of the service tax being held not leviable and being refunded to the respondent AAI, the same shall enure to the benefit of the petitioner
4.
5.
545/2007
546/2007
The petitioners had entered into an agreement with the respondent AAI for providing Car Parking Facility/Restaurants/Snack Bars at several airports. Upon insertion of Clause (zzm) (supra) the petitioners enquired from the respondent AAI whether any service tax was to be collected from the end user. The respondent AAI replied in the negative. Subsequently however on service tax being levied on the respondent AAI, the respondent AAI demanded the same from the petitioners. The petitioners besides disputing the leviability of the service tax also contended that even if it was leviable, they were not liable since inspite of their query the respondent AAI had informed them that no service tax was leviable. The petitioners invoked the arbitration clause and ultimately approached the Bombay High Court which also directed appointment of an arbitrator qua the agreement with respect to the Bombay Airport. Though the respondent AAI in pursuance thereto also appointed arbitrator for similar dispute qua other airports but subsequently revoked the appointment for other airports save Mumbai. Though the petitioners have not paid the service tax demanded by the respondent AAI but the respondent AAI is holding bank guarantees/FDRs furnished by the petitioners. It is directed that the said bank guarantees/FDRs shall be kept alive as aforesaid and the petitioners shall also furnish the undertaking as directed in serial no.1&2 above. It is further directed that in the event of the service tax being ultimately held leviable, the arbitration proceedings shall be qua all airports subject matter of agreement and not only Mumbai Airport
clause and ultimately approached the Bombay High Court which also directed appointment of an arbitrator qua the agreement with respect to the Bombay Airport. Though the respondent AAI in pursuance thereto also appointed arbitrator for similar dispute qua other airports but subsequently revoked the appointment for other airports save Mumbai. Though the petitioners have not paid the service tax demanded by the respondent AAI but the respondent AAI is holding bank guarantees/FDRs furnished by the petitioners. It is directed that the said bank guarantees/FDRs shall be kept alive as aforesaid and the petitioners shall also furnish the undertaking as directed in serial no.1&2 above. It is further directed that in the event of the service tax being ultimately held leviable, the arbitration proceedings shall be qua all airports subject matter of agreement and not only Mumbai Airport.
6.
1296/2007
The agreement of the petitioner herein was with respect to the �Travellers Shop? at Kolkata Airport. This petitioner has also already paid the service tax to the respondent AAI. Accordingly the directions as in serial no.3 above shall apply to this case also.
7.
4655/2011
The agreement in this case was with respect to the �Visitors Needs? Shop at Thiruvananthapuram Airport. The counsels are unable to inform whether the petitioner has paid the service tax or furnished any other security. Else, it is not in dispute that liability if any ultimately held is of the petitioner. It is directed that if the petitioner has not already paid the service tax or if the petitioner has not furnished any security, the petitioner shall as aforesaid submit an undertaking to pay the service tax if ultimately found due.
8.
8261/2011
The agreement in this case is with respect to �Tea/Snack Shops? at Chennai Airport. The petitioner has already paid the service tax. Accordingly, the position as in serial no.3 above shall prevail.
9.
8262/2011
The agreement in this case is with respect to the �Left Luggage Facility? at Chennai Airport. The service tax has already been paid. Accordingly the position as in serial no.3 above shall prevail
10.
The agreement in this case is qua a �Cafeteria? at Coimbatore Airport. The service tax has already been paid. The position as in serial no.3 above shall prevail.
11.
8264/2011
The agreement in this case was for �Office Space?. The petitioner though has not paid the service tax but has furnished the bank guarantee. There is no dispute that service tax if ultimately found due is to be borne by the petitioner. Accordingly, it is directed that till the final determination, the bank guarantee shall be kept alive.
The petitions are disposed of with the aforesaid directions. No order as to costs.