Airports Authority of India Act, 1994: ss. 22, 22A – Finance Act, 1994 – ss. 67 and 68 (1) –User development fee-UDF, levied and collected u/s. 22A by the airport operation, maintenance and development entities-Mumbai International Airport Pvt. Ltd., Delhi International Airport Pvt. Ltd., and Hyderabad International Airport Pvt. Ltd., from the domestic/international passengers departing the airport – Levy of service tax – Held: User development fee levied and collected by the airport entities is a statutory levy, thus, not subject to service tax levy under the provisions of the Finance Act – UDF collected by the assessee is to bridge the funding gap of project cost for the development of future establishment at the airports – There is nothing on record to show that any additional benefit has accrued to passengers, visitors, traders, airlines etc., upon levy of UDF during the said period – As part of the Union’s economic policies, the upgradation and renovation of airports are funded through UDF, which is a statutory levy – Airports Economic Regulatory Authority of India Act, 2008 – s. 13 – Aircraft Rules, 1937 – r. 88, 89.
Dismissing the appeals, the Court
HELD: 1.1 The nature of development fee, collected under Section 22A of the Airports Authority of India Act, 1994 is that of statutory exactions and not fees or tariffs. [Para 29][339-H]
1.2 To attract service tax levy, a taxable service has to be provided to a recipient, by a service provider, for a consideration and in the absence of any nexus to any service rendered, an amount charged, or value of service or goods provided without a consideration would not be a taxing incident. [Para 32][341-E]
1.3 Besides the Airports Authority of India (Major Airports) Development Fees Rules 2011, the assessee, in the case of DIAL, has placed on the record, a letter issued to it, by AAI which imposes controls on the utilization of amounts collected as development fee; apart from the fact that the amounts are deposited in an escrow, any plan for utilization has to be approved. Unlike fees, rent, charges etc., provided under Section 22 of AAI Act, assessee companies are authorized on behalf of the AAI to levy and collect ‘development fee’ under Section 22A of the AAI Act on behalf of the AAI and was applied for generating revenue for utilization of the same for the specific purpose provided under sub- clause (a), (b) and (c) of section 22(A) of the AAI Act. The UDF collected by the assessee is to bridge the funding gap of project cost for the development of future establishment at the airports. There is nothing on record to show that any additional benefit has accrued to passengers, visitors, traders, airlines etc. upon levy of UDF during the period in question in the present case. [Para 34][342-C-F]
1.4 There is a distinction between the charges, fee and rent etc. collected under Section 22 of the AAI Act and the UDF levied and collected under Section 22A of the AAI Act. It is that the UDF is in the form of ‘tax or cess’ collected for financing the cost of future projects and there was no consideration for services provided by the assessee to the customer, visitors, passengers, vendors etc. The aggregate of collections in the bank accounts do not form part of profit and loss account. [Para 35][342-F-G]
1.5 It is also useful to notice that by a circular issued by the CBEC, Circular No. 89/7/2006- ST dated 18.12.2006, it was clarified that collection of amounts, by way of taxes, sovereign or statutory dues, would not be subjected to service tax levy. [Para 36][342-G; 343-A]
1.6 In the instant case, undoubtedly neither is there any compulsion to levy development fee, nor is the collection conditional upon its deposit in the government treasury. However, the absence of these features does not render User Development fee(UDF) any less a statutory levy. Firstly, the ruling in Consumer Online Foundation’s case is conclusive that UDF is a statutory levy. Secondly, the collection is not premised on rendering of any service. Thirdly, the amounts collected are deposited in an escrow amount, not within the control of the assesses. Fourthly, the utilization of funds, is monitored and regulated by law. In this regard, the fact that the amount is not deposited in a government treasury, per se, does not make it any less a statutory levy or compulsory extraction. Nor does its discretionary nature, render it any less a statutory levy. Airport management has evolved; it is no longer the monopoly of the government; private participation is recognized. As part of the Union’s economic policies, the upgradation and renovation of airports is funded through UDF, which is a statutory levy. Instead of the conventional practise of ensuring that amounts collected are deposited with the Government, an entirely new regulatory regime has been envisioned, under the 2011 Rules, read with specific conditions imposed by the Airport Authority India on each assessee, which includes monitoring of amounts, nature of expenditure, submission of plans for expansion, renovation, their sanctioning etc. These rules and controls are in public interest, and evidently intended to further efficiency in funding and swift taking up and completion of works, rather than funding through Finance Rules, which might entail delay, and cost overruns. However, the public nature of these funds does not in any manner get undermined, merely because they are kept in an escrow account, and their utilization is monitored separately. Thus, the impugned order cannot be faulted. [Paras 39, 40][345-B-H; 346-A] Consumer Online Foundation v Union of India 2011
(5) SCR 911; Commissioner of Service Tax vs. Bhayana Builders (P) Ltd. 2018 (1) SCR 1128 – relied on. Krishi Upaj Mandi Samiti v Commissioner of Central Excise 2022 (1) SCR 700 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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