Airport user development fee taxability turns on quid pro quo, with conflicting views on whether passenger amenities make it taxable service.

User Development Fee levied at airports was examined for service tax liability under the airport services category, with the key issue being whether the charge had a sufficient quid pro quo to amount to taxable consideration. The Judicial Member held the demand unsustainable, following precedent that analogous development or user levies do not amount to a service provided to individual passengers. The Technical Member, however, treated the fee as contractually linked to passenger amenities and facilities, found it inclusive of taxes, and held it exigible to service tax. The Bench recorded a difference of opinion on this determinative question and referred the matter to a third member for resolution.

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Issues: Whether User Development Fee collected from embarking passengers under the concession arrangement is exigible to service tax as a taxable service under airport services.

Analysis: One view held that the fee was collected under the contractual framework for providing passenger amenities, services and facilities at the airport, with a direct nexus to the charge and therefore constituted consideration for a taxable service. The contrary view treated the fee as not shown to be a payment for any specific service rendered to passengers and relied on the distinction drawn in earlier airport-fee decisions, emphasizing the levy's regulated character and the absence of conclusive majority authority on this precise fee.

Conclusion: The Members differed on taxability: one Member held the User Development Fee liable to service tax and the other held it not taxable.

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