Air Cargo Agent Building is a part of Airport /Aerodrome, Excludes under Exclusion Clause of WCS: CESTAT [Read Order]

The Hyderabad Bench of the Customs, Excise And Service Tax Appellate Tribunal ( CESTAT )while setting aside the show cause notice demanding service tax held that Air Cargo Agent building is a part of Airport /Aerodrome and the activity constructing same is excluded under exclusion clause of Work Contract Service ( WCS ).

SEW Infrastructure Private Limited, the appellant were registered with the Service Tax Department under the category of transport of goods by road service etc. They are engaged in the business of development of various infrastructure facilities for both Government and public/private sector undertakings. The Appellant entered into a contract with M/s GMR Hyderabad International Airport Ltd., (GHIAL) in December 2007 for construction of ‘cargo agents building’ at the airport.

The Appellant had also stated that construction of cargo agents building awarded by GHIAL falls within the ambit of ‘airport’ as the said building was by way of annexxe to the cargo terminal at the airport. As such the activity falls within the ambit of airport and does not attract service tax under the exclusion clause in Section 65(105)(zzzza). It is also stated that as per Clause (b) of Section 2 of Airport Authority of India Act, 1994 airport is defined as – ‘Airport’ means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in Clause(2) of Section 2 of the Aircraft Act, 1934.

It was argued that Aerodrome means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or  appertaining thereto.

It appeared to Revenue that the said building is being used for other allied business activities relating to export/import of goods. It further appeared that air cargo building cannot be considered as a part of the airport. Accordingly, a SCN issued invoking the extended period of limitation service tax was demanded Rs. 2,71,71,733/- under the Head Works Contact Service for the period 2007 – 08 - till 2008-09 as per annexure to the SCN along with interest further penalty was proposed under Section 77 and 78 of the Act.  The SCN was confirmed by the commissioner.

 The Appellant contends that the ‘cargo agent building’ facility falls within the ambit of airport and as such the construction service provided does not attract service tax. 

Further stated that the said building is appertaining to the runway opposite the cargo terminal to receive the cargo and the same is covered under the definition of Aerodrome. Section 65 (3c) of Finance Act defines airport as – airport has a meaning assigned to it in Clause (b) of Section 2 of the Airport Authority of India Act 1994 read with the definition of Aerodrome.

It was also urged that it is evident from the master plan that there is no physical separation between the air cargo agent building and the cargo terminal building. In the master plan, a term – future road, labelling can be seen in between the 2 buildings. It is further urged that the 2 buildings are inseparable and the same are interrelated. Further urges that the building constructed in the instant case is essential for the day to day functioning of the cargo terminal. Further urges that the 2 building are not separated by any boundary wall etc.

 A two member bench of Mr Anil Choudhary, Member (Judicial) and Mr A K Jyotishi, Member (Technical) viewed that the air cargo agent building is admittedly constructed as an annexee building to the air cargo terminal and the same is necessary for the smooth functioning of the air cargo terminal. It is admitted fact that both incoming and outgoing cargo is partly processed by the air cargo agents facilitating the main processing and clearance for export/import, in the air cargo terminal.

The CESTAT held that the air cargo agent building constructed by the Appellant forms part of the airport/Aerodrome and accordingly the said activity stands excluded under the exclusion clause in the definition of works contract service. Shri Anil Kumar Kathuria, Advocate for the Appellant.  Shri V R Pavan Kumar, AR for the Respondent

To Read the full text of the Order CLICK HERE

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