License to Run Duty-Free Shops Constitutes Renting of Immovable Property, Not Liable to Service Tax under Airport Service Before 2010: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that granting a license to operate duty-free shops at Delhi International Airport amounted to renting of immovable property and could not be taxed as airport services before July 01, 2010.

Airport Retail Pvt. Ltd., the appellant, had taken licenses from Delhi International Airport (DIAL) to run duty-free shops inside the airport premises. DIAL collected service tax from the appellant under the category of “airport services.” The appellant filed a writ petition before the Delhi High Court challenging the levy.

The Delhi High Court in its judgment dated 30.07.2014 held that the license arrangement was in the nature of renting of immovable property and not airport services. The court also gave liberty to the appellant to claim a refund.

Based on this, the appellant filed a refund claim of Rs. 11,73,30,977/-. The department rejected the claim, and the Commissioner (Appeals) upheld the rejection. Aggrieved, the appellant approached the CESTAT.

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The appellant’s counsel argued that the classification issue had already been settled by the Delhi High Court, which clearly held that no service tax was payable under airport services for the period in dispute.

They further argued that the refund claim was filed within one year from the date of the High Court’s judgment, and DIAL had confirmed that the tax collected was deposited with the department, meaning no unjust enrichment arose.

The revenue counsel argued that the appellant failed to fulfill legal requirements regarding classification and maintained that the refund claim was not admissible. The department relied on the orders of the adjudicating authority and the Commissioner (Appeals).

The two-member bench comprising Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) observed that the Delhi High Court had already settled the issue by holding that the activity could not be classified as airport services before 01.07.2010.

The tribunal pointed out that the refund claim was filed within one year of the High Court’s judgment, which was the relevant date under Section 11B of the Central Excise Act. The tribunal also explained that DIAL’s confirmation showed that the burden of tax had not been passed on to any other party.

The tribunal held that rejecting the refund claim on the ground of classification was not sustainable. The impugned orders were set aside, and the appeal was allowed with a direction to grant the refund to the appellant.

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