Wens International Pvt. Ltd. And ... vs Airport Authority Of India And ...
2012 Latest Caselaw 6857 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                    DECIDED ON: 30.11.2012

+                                 W.P.(C) 2734/2012

       WENS INTERNATIONAL PVT. LTD AND ANR
                                                         ..... Petitioners
                             Through:    Mr.Sankar Divete & Mr.Soumya
                                         Dutta, Advs.

                    versus

       AIRPORT AUTHORITY OF INDIA AND ANR ..... Respondents

Through: Mr.Digvijay Rai, Standing Counsel for Airport Authority of India.

Mr.V.C. Jha for Ms.Sonia Sharma, Sr. Standing Counsel for R-2.

CORAM:

MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR

MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)

%

1. The petitioners claimed a direction that the payment made by the Airports Authority of India by letter dated 14.02.2007, in respect of the service tax liabilities imposed in this case are to be paid by it.

2. The brief facts of the case are that the petitioner successfully bid and granted licence for management of car rental and car parking for domestic and international airport terminal building at NSCBI Airport, Kolkata in March 2001. On 16.6.2001, an agreement detailing the terms and conditions

W.P.(C) 2734/2012 Page 1 of licence was executed by the parties. The licence and subsequently another agreement was duly entered into by the parties. This position continues from time to time. The last agreement entered into between the parties was on 18.01.2006. The petitioner was granted a licence for five years thereby it was to pay Rs.5,55,000/- per month in the first year with 10% compound escalation for the succeeding years. During the subsistence of the agreement w.e.f. 01.04.2004, Parliament amended the Finance Act, 1994 and introduced clause (zzm) to Section 65(105). This development sought to be bringing within its fold a taxable event i.e. services of certain clauses of services and functions including parking facilities in airport. The change in the definition of taxable services brought by the said amendment clause (zzm) reads as follows:-

"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."

3. On 14.2.2007, the Airports Authority issued the impugned notice/communication to the petitioner. By the letter, the petitioner was directed to make payment of service tax to Airports Authority w.e.f. 10.9.2004 along with arrears. The impugned letter reads as follows:-

"No.AAC/COM/666/SERVICE TAX/264 February 14,

To All Concessionaires/Commercial Licensees, (As per list attached)

W.P.(C) 2734/2012 Page 2 NSC Bose International Airport, KOLKATA-52.

Subject: Liability of Service Tax as determined by Commissioner (Service Tax) reg.

Sir,

Please refer to our letter of even number dated 19.09.2006 regarding service tax liability on non-traffic revenue w.e.f. 10.09.2004.

2. In this connection, it is stated that the levy of Service Tax is a statutory requirement of the Govt. of India under provisions of Section 86 of the Chapter V of Finance Act, 1994. Directorate of Finance, AAI, CHQ has also reiterated that all the concerned „Non-Traffic Services‟ providers at airport are required to pay the applicable Service Tax w.e.f. 10.09.2004 along with arrears to AAI. They have also intimated that any dispute on this issue is not falling under the ambit of the arbitration clause of the „licence agreement‟.

3. In view of the above, you are requested to make the payment of Service Tax payable to AAI w.e.f. 10.09.2004 along with arrears, if the same has not been paid to AAI within a period of one week from the issue of this letter, failing which further appropriate action to encash the Security Deposits will be taken to adjust the outstanding dues without any further reference.

4. Please acknowledge receipt of this letter.

Yours faithfully,

(JAGAT PAL) MANAGER (COMMERCIAL) FOR AIRPORT DIRECTOR"

W.P.(C) 2734/2012 Page 3

4. The petitioner claims to be aggrieved by this letter and submits that the demand is unreasonable and that when the Finance Act was sought to be amended, the Airports Authority had clarified that it was not required to collect any service tax component from the customers who use the facility.

5. These proceedings were initially presented and entertained by the Calcutta High Court; subsequently by the order of the Supreme Court in which similar questions of law had arisen in relation to parking facilities such as Mumbai, Delhi, Chennai and Bangalore directed transfer and consultation of all such proceedings before this Court. It is brought to the notice of this Court that the Division Bench ruling of 12.4.2012 has now concluded the issue.

6. Learned counsel for the Airports Authority has placed reliance on the judgment in Hans Enterprises vs. Airports Authority of India & Ors., W.P.(C) No.15095/2006 and connected cases (decided on 12.4.2012). In that case, the Court had to deal with an identical situation which included the parking services and subject of levy. The parking contractor- as the petitioner in this case, has contended that it was not liable to pay tax and the Airports Authority was liable and that in the circumstances and since it has not collected the amounts from the customers, the pending demands ought to be paid by the Airports Authority. In these cases, Airports Authority contended that the demand made by the service tax authority had been satisfied and that it had appealed to the CESTAT. In that context, the Court had observed as follows:-

"4. 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

W.P.(C) 2734/2012 Page 4 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.

6. 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.

7. Besides the aforesaid dispute, there is also a dispute, as to who is to bear the service tax, if ultimately found applicable.

8. 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.

9. 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.

10. 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

W.P.(C) 2734/2012 Page 5 and to also furnish such other details as may be required by the petitioners.""

7. The Division Bench in Hans Enterprises (supra) also, in connection with the writ petition Nos.545/2007 and 546/2007, which concerned parking service facilities in airports, directed as follows:-

"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."

In the present case too, the agreements contain an arbitration clause

W.P.(C) 2734/2012 Page 6 like in the other cases where the Airports Authority has preferred an appeal before the CESTAT. Having regard to these facts which are identical with the fact and situation that the Court had to deal with the Hans Enterprises (supra), similar directions are required to be made in the present writ petition too. Accordingly it is directed that:

1) The petitioners should be permitted to address submissions in the pending appeal filed by the Airports Authority before the CESTAT questioning the demands made towards the service tax arrears. To facilitate this, the Airports Authority shall furnish the appeal numbers and the expected next date of hearing, the application made in that regard by the writ petitioners. The Tribunal shall reasonably consider the same and permit the writ petitioners to make submissions as to its liability or otherwise in that regard and consider the same on merits.

2) It is open to the writ petitioners to seek recourse to arbitration proceedings in accordance with the agreement. If a request is made in that regard to the Airports Authority, the matter shall be referred to the Arbitral Tribunal in accordance with the agreement entered into by the parties.

3) During the pendency of the proceedings before the Arbitrator and in order to secure the interest of the parties including the Airports Authority, it is open to the said party to retain the security deposit paid by the petitioners/licencees to the extent necessary having regard to the likely liability which may arise. This is without prejudice to the rights and contentions of the parties. All rights are reserved during the pendency of the proceedings before the CESTAT and the Arbitrator. It is further agreed by the parties that the pendency of either proceedings shall not come in the way of the writ petitioners to bid for any parking contract for later years. Such

W.P.(C) 2734/2012 Page 7 offer shall be considered entirely on their merits.

8. The writ petition is disposed of in terms of the above directions.

S. RAVINDRA BHAT (JUDGE)

R.V.EASWAR (JUDGE) NOVEMBER 30, 2012 'gm'

W.P.(C) 2734/2012 Page 8