Statutory development fee was treated as a public levy, leading to remand for fresh service tax adjudication.

Development fee collected under section 22A of the Airports Authority of India Act, 1994 was treated as a statutory levy for airport upgradation, expansion and development, not as contractual consideration for taxable airport service. The reasoning further noted that such a levy could not be indirectly subjected to service tax where the related construction, erection, commissioning or installation activities were outside the taxable net during the relevant period or otherwise exempted. As the adjudicating authority had not properly examined the statutory scheme, binding precedents and circulars, the demand of service tax, interest and penalties was not finally sustained and the matter was remanded for de novo adjudication after hearing the appellant.

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Issues: Whether development fee collected under section 22A of the Airports Authority of India Act, 1994 is consideration for taxable airport service and whether the demand of service tax, interest and penalties could be sustained without proper examination of the statutory scheme and binding precedents.

Analysis: Development fee under section 22A was treated as a levy authorised for funding and financing airport upgradation, expansion and development, and not as a contractual charge for services rendered to embarking passengers. The collection was held to be in the nature of a cess or tax for a specified public purpose. The reasoning also noted that the levy could not be indirectly brought to service tax when the underlying activities relating to construction, erection, commissioning or installation of airport works were outside the taxable net during the relevant period or otherwise exempted. The adjudicating authority had not dealt with these issues in a proper manner, nor with the effect of the cited precedents and circulars, so a fresh adjudication was required.

Conclusion: The demand was not finally upheld on merits and the matter was remanded for de novo consideration after granting hearing to the appellant.

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