Export Cargo Handling Taxable: Supreme Court Upholds Levy on Airports Authority of India

Case Name: Airports Authority of India v. Commissioner of Service Tax

Citation: 2025 INSC 1141.

Date of Judgment: 23 September 2025.

Bench: Justice Pankaj Mithal and Justice Prasanna B. Varale (DB).

Held: The Supreme Court held that services rendered by the Airports Authority of India (AAI) in relation to handling of export cargo at airports fall within the scope of “taxable service” under Section 65(105)(zzm) of the Finance Act, 1994 once this provision was introduced on 10 September 2004. Although “handling of export cargo” is excluded from the definition of “cargo handling service” under Section 65(23), that exclusion does not take it outside the purview of taxable services when performed by the Airports Authority in an airport.

Summary: The Airports Authority of India, a statutory body under the Ministry of Civil Aviation, was engaged in cargo handling at airports, including export consignments. The Commissioner of Service Tax, by order dated 17 March 2010, confirmed liability on AAI for the period 1 October 2003 to 31 March 2007, first under the category of “storage and warehousing service” up to 9 September 2004 and thereafter under “airport services.” The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in 2017 upheld the liability under “airport services,” leading AAI to approach the Supreme Court.

AAI argued that under Section 65(23) of the Finance Act, handling of export cargo was expressly excluded from the definition of “cargo handling service” and therefore not taxable. It relied on the proviso to this section and departmental circulars to assert exemption. The Supreme Court rejected this contention, clarifying that Section 65 only provides definitions and is not the charging section. Tax liability arises under Section 66, which imposes service tax on “taxable services” defined in Section 65(105). Sub-clause (zzm) of that provision, inserted with effect from 10 September 2004, expressly covered “any service provided to any person, by the Airports Authority or by any other person in any airport or a civil enclave.” The Court held that this language was wide enough to encompass all services provided at airports, including export cargo handling, notwithstanding its exclusion from the narrower definition of “cargo handling service.”

The Court further held that departmental circulars cannot override the statutory mandate of Section 66 read with Section 65(105)(zzm). Once the provision came into effect, AAI’s activities at airports—whether relating to domestic or export cargo—were taxable.

Decision: The Supreme Court dismissed the appeal filed by AAI, upholding the orders of the CESTAT and the tax authorities confirming levy of service tax on export cargo handling under “airport services” with effect from 10 September 2004. Pending applications were also disposed of.