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SUPREME COURT OF INDIA
S. RAVINDRA BHAT, DIPANKAR DATTA, JJ.
Central GST Delhi-III – Appellant
Versus
Delhi International Airport Ltd. – Respondent
Civil Appeal No. 8996 of 2019, Civil Appeal No. 2465 of 2020, Civil Appeal Nos. 4751-4753 of 2021
Decided On : 19-05-2023
Finance Act, 1994 – Sections 22A and 67 – Levy of service tax on user development fee levied and collected by airport operation, maintenance and development entities – To attract service tax levy, a taxable service has to be provided to a recipient, by a service provider, for a consideration – In absence of any nexus to any service rendered, amount charged, or value of service or goods provided without a consideration, would not be a taxing incident – In present case, neither is there any compulsion to levy development fee nor is collection conditional upon its deposit in government treasury – However, absence of these features does not render UDF any less a statutory levy – Impugned orders cannot be faulted – Revenue’s appeals dismissed. (Paras 32, 39 and 40)
Result : Appeals dismissed.
Key Points: - UDF is a statutory levy collected under Section 22A of the AAI Act for funding airport development, and not a consideration for services rendered (!) . - For service tax to apply, there must be a nexus between the amount charged and the taxable service provided (!) . - In the absence of any consideration or service rendered, amounts charged without such nexus are not taxable (!) . - The court held that development fees under Section 22A are in the nature of a cess or tax, not charges or tariffs for services (!) . - The revenue’s contention that UDF qualifies as an airport service taxable under Section 65(105)(zzm) was rejected due to lack of service consideration (!) . - The characterization of the levy as a statutory exaction means it does not attract service tax merely because it is collected by a service provider (!) . - The principles in Consumer Online Foundation were applied to distinguish statutory levies from service-based charges (!) . - Section 67 requires a direct link between the amount charged and the taxable service provided (!) . - The escrow mechanism and regulatory control over UDF do not convert it into a taxable service (!) . - The appeals were dismissed based on the above legal principles (!) .
JUDGMENT :
S. RAVINDRA BHAT, J.
1. In all these appeals, orders of the Customs, Excise and Service Tax Appellate Tribunal 1 [Final Order No. ST/A/50064/2019-CUIDBI dated 18.01.2019 (by the Principal Bench, CESTAT, New Delhi); Final Order No. A/88830-88832/16/STB dated 28.01.2016 (by the Western Zonal Bench, CESTAT, Mumbai) and Final Order No. A/30739/2019 dated 16.09.2019 (by the CESTAT Regional Bench at Hyderabad)] (hereafter “CESTAT”) are impugned by the service tax authorities (hereafter “the revenue”) who argue that user development fee levied and collected by the airport operation, maintenance and development entities (i.e. the Mumbai International Airport Pvt. Ltd. the Delhi International Airport Pvt. Ltd. and the Hyderabad International Airport Pvt. Ltd. (hereafter collectively called “the assessees”) is subjected to service tax levy, under the provisions of the Finance Act, 1994 (hereafter “the Act”).
2. All the assessees had entered into joint venture arrangements/agreements (hereafter “OMDA”) with the Airports Authority of India (hereafter “AAI” a body corporate created by the Airports Authority of India Act, 1994 [hereafter “AAI Act”]. Under OMDA, the assesses agreed to undertake some activities enjoined upon the AAI, by the AAI Act. The assessees were authorised, by various notifications (dated 27th February 2009) issued by the Central Government under Section 22A of the AAI Act to collect a “development fee” @ Rs. 100/- for every departing domestic passenger and Rs. 600/- for every departing international passenger at the concerned airports for a period of 48 months.
3. The Commissioner of Service Tax, through various show cause notices demanded payment of tax on the development fee collected for various periods. These notices were adjudicated and confirmed; the CESTAT remanded the matter to the original authority requiring fresh adjudication after taking into consideration the decisions of this court in Consumer Online Foundation vs. Union of India, (2011) 5 SCC 360, Commissioner of Central Excise vs. Cochin International Airport Ltd. 2010 (17) STR J 79 (SC) and Acer India Ltd. and Orissa Cement Ltd. vs. State of Orissa, 1991 Supp. (1) SCC 430 and various instructions issued by the Central Board of Excise and Customs (hereafter “CBEC”). The original authority disposed of all show cause notices by confirming demands, and also levying penalties under the Act. The adjudicating authority accorded the benefit of “cum-tax” valuation. These orders were challenged before the CESTAT, which, by the orders impugned, allowed the assessees’ appeals, holding that the development fee collected was not liable to service tax levy.
(II) The relevant provisions
4. Section 65 (105) (zzm) of the Finance Act, 1994, contains the definition of “airport service” (with effect from 01.07.2010) and states that such service is:
“any service provided or to be provided by airports authority or by any other person in any airport or a civil enclave.”
Before the amendment, i.e. before 1 July 2010, the definition, of airport service was as follows:
“to any person, by airports authority or any person authorised by it, in an airport or a civil enclave.”
Section 65 (3d) defines airport authority as:
“Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 (55 of 1994) and also includes any person having the charge of management of an airport or civil enclave.”
5. Section 68 (1) of the Finance Act provides that every person providing taxable service to any person shall pay service tax at the rate specified in section 66. Section 67 (1) of the Finance Act, provides that where service tax is chargeable on any taxable service with reference to its value then such value shall be the gross amount charged by the service provider for such service provided or to be provided by him.
6. The relevant provisions of the Airports Economic Regulatory Authority of India Act, 2008 and the Aircraft Rules, 1937 are extracted below:
Sect
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