No Service Tax On Route Navigation Facility Charges, Leviable On Terminal Landing Charges: CESTAT Delhi

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, on 18 February, held that Service Tax is not leviable on Route Navigation Facility Charges (RNFC) collected by the Airports Authority of India (AAI), as such services are not rendered entirely within the airport or civil enclave, as required under Section 65(105)(zzm) of the Finance Act, 1994.

A Division Bench Judicial Member Binu Tamta and Technical Member Hemambika R. Priya was hearing AAI's appeal against confirmation of service tax demand on RNFC, Terminal Navigation Landing Charges (TNLC) and certain miscellaneous income.

The Tribunal recorded the issues as:

“(a) Leviability of Service Tax on RNFC & TNLC

(b) Service Tax on Miscellaneous Income

(c) Whether assessment for the period 10.09.2004 to 28.02.2005 was provisional”

On the first issue, the Tribunal held that Service Tax is not leviable on RNFC. It observed that route navigation services are provided to aircraft across Indian airspace, including overflying flights, and are not rendered entirely within airport or civil enclave premises. Since Section 65(105)(zzm) of the Finance Act, 1994 covers only services provided “in any airport or civil enclave,” the demand on RNFC was set aside.

However, in respect of TNLC, the Tribunal held that such charges relate to landing and airport-based assistance, which are clearly provided within airport premises. The levy on TNLC was therefore upheld, and the matter was remanded only for quantification of demand. The Bench stated:

“Since, as per the Tribunal's order, the said service was exigible to service tax only if the entire service had been provided within the airport/civil enclave. This is not the case. Hence, we hold that RNFC is not exigible to service tax.”

On the second issue relating to miscellaneous income, including profit on sale of fixed assets, interest on staff advances, and scrap sales, the Tribunal held that these receipts had no nexus with the provision of any taxable service. The demand under this head was accordingly set aside.

Regarding TNLC, the Bench remanded the matter only for re-quantification of the TNLC demand. It stated:

“From the terminology of the said charge, it is self-evident that this service is being provided to assist the aircrafts in landing, and such service is being provided within the airport/civil enclave. Consequently, we hold that these charges are eligible to service tax.”

On the third issue of limitation, the Tribunal held that the show cause notice was issued within the normal period of one year from the relevant date under Section 73 of the Finance Act, 1994, and was therefore not time-barred.

Accordingly, the Tribunal allowed the appeal.

Appearance for the Appellant: Shri Prakash Kumar Sinha & Shri Ayush Kumar, Advocates

Appearance for the Respondent: Shri Mahboob Ur Rehman, Authorized Representative