Case Note & Summary
The Supreme Court considered appeals by the revenue against CESTAT orders that had held user development fee collected by airport operators not liable to service tax. The assessees, Mumbai International Airport Pvt. Ltd., Delhi International Airport Pvt. Ltd., and Hyderabad International Airport Pvt. Ltd., had entered into Operation, Management and Development Agreements (OMDA) with the Airports Authority of India (AAI). Under Section 22A of the Airports Authority of India Act, 1994, and notifications dated 27th February 2009, they were authorized to collect a development fee from departing passengers at specified rates. The revenue issued show cause notices demanding service tax on this fee, which were confirmed by the adjudicating authority with cum-tax valuation benefit. The CESTAT allowed the assessees' appeals, holding the fee not taxable. The Supreme Court examined the definition of 'airport service' under Section 65(105)(zzm) of the Finance Act, 1994, and the charging provisions. It noted that the development fee was a statutory levy collected under the AAI Act, not a consideration for any service provided to passengers. The court held that such a statutory fee cannot be subjected to service tax as it does not fall within the ambit of 'taxable service'. Consequently, the Supreme Court allowed the revenue's appeals, set aside the CESTAT orders, and restored the adjudicating authority's orders confirming the demand. The court did not address the cum-tax valuation issue as the primary question was the leviability of service tax itself.
Headnote
A) Service Tax - Airport Service - User Development Fee - Finance Act, 1994, Sections 65(105)(zzm), 66, 67, 68 - The issue was whether user development fee collected by airport operators under Section 22A of the Airports Authority of India Act, 1994 and notifications issued thereunder is liable to service tax. The court held that such fee is a statutory levy and not consideration for any service provided to passengers, and therefore not subject to service tax. The appeals by the revenue were allowed, setting aside the CESTAT orders and restoring the adjudicating authority's orders confirming the demand. (Paras 1-3, 10-12) B) Service Tax - Taxable Service - Consideration - Finance Act, 1994, Section 67 - The court examined whether the development fee collected by the assessees constituted 'gross amount charged' for a taxable service. It held that since the fee is collected under statutory authority and not as a quid pro quo for any service, it cannot be treated as consideration for a taxable service. (Paras 4-6) C) Service Tax - Cum-tax Valuation - Finance Act, 1994 - The adjudicating authority had granted benefit of cum-tax valuation, but the court did not specifically address this issue as the main question was whether service tax was leviable at all. (Para 3)
Issue of Consideration
Whether the user development fee collected by airport operators from passengers under statutory notifications is subject to service tax under the Finance Act, 1994.
Final Decision
The Supreme Court allowed the appeals by the revenue, set aside the impugned CESTAT orders, and restored the orders of the adjudicating authority confirming the demand for service tax on the development fee.
Law Points
- Service tax is leviable only on taxable services as defined under the Finance Act
- 1994
- User development fee collected by airport operators under statutory notifications is not a consideration for any service provided to passengers but a statutory levy
- The definition of 'airport service' under Section 65(105)(zzm) does not encompass collection of development fee
- The principle of 'cum-tax' valuation applies only when service tax is otherwise leviable
