Statutory development fee not treated as consideration for taxable service, leaving the service tax demand unsustainable.

A compulsory development fee collected under section 22A of the Airports Authority of India Act, 1994 was treated as a statutory levy for future airport development, not as consideration for any specific service to departing passengers. Because the levy was collected through airlines without conferring an additional service benefit and lacked a direct nexus with service rendered, it did not satisfy the charging provision in section 65(105)(zzm) of the Finance Act, 1994. On that basis, the service tax demand and penalties were held unsustainable, and the levy was taken outside the service tax net.

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Issues: Whether the development fee collected under section 22A of the Airports Authority of India Act, 1994 constituted consideration for a taxable service within section 65(105)(zzm) of the Finance Act, 1994 and was therefore liable to service tax.

Analysis: The development fee was a statutory levy authorised for future development of the airport and was collected compulsorily through airlines without conferring any additional service benefit on departing passengers. The levy was distinct from user charges for specific facilities under the Airports Authority of India Act, 1994 and lacked the necessary nexus with any service rendered to the passengers. The show cause notices and adjudication also failed to establish how the levy satisfied the charging provision for service tax. The earlier decisions concerning the same development fee and the statutory character of the levy supported the view that it was not consideration for service.

Conclusion: The development fee was not chargeable to service tax under section 65(105)(zzm) of the Finance Act, 1994, and the service tax demand and penalties were unsustainable.

Final Conclusion: The impugned order was set aside and the assessee obtained consequential relief, as the levy was held to fall outside the service tax net.

Ratio Decidendi: A compulsory statutory levy collected for a public purpose, without a direct nexus to specific services rendered to the payer, does not constitute consideration for taxable service.

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