2023 (5) TMI 867 - SC - Service Tax

Supreme Court Rules User Development Fee by Airports is Statutory Levy, Not Subject to Service Tax, Dismissing Revenue Appeals.

CENTRAL GST DELHI - III Versus DELHI INTERNATIONAL AIRPORT LTD

CENTRAL GST DELHI - III Versus DELHI INTERNATIONAL AIRPORT LTD - 2023 (74) G.S.T.L. 129 (SC), [2023] 114 G S.T.R. 1 (SC) Issues Involved:1. Whether the User Development Fee (UDF) collected by airport operators is subject to service tax under the Finance Act, 1994.2. Nature of UDF: Whether it is a statutory levy or a consideration for services provided.3. Applicability of the decision in Consumer Online Foundation v. Union of India to the current case.4. Distinction between charges under Section 22 and Section 22A of the Airports Authority of India Act, 1994.Summary:1. Whether the User Development Fee (UDF) collected by airport operators is subject to service tax under the Finance Act, 1994:The Supreme Court examined the orders of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) which held that the development fee collected by airport operators was not liable to service tax. The revenue argued that the UDF is subject to service tax under the Finance Act, 1994, as it constitutes a consideration for services provided by airport operators. The court analyzed the relevant provisions of the Finance Act, 1994, and the Airports Authority of India Act, 1994, and concluded that the UDF is not a consideration for services rendered, but a statutory levy.2. Nature of UDF: Whether it is a statutory levy or a consideration for services provided:The court referred to the decision in Consumer Online Foundation v. Union of India, which held that the development fee under Section 22A of the Airports Authority of India Act, 1994, is a statutory levy and not a consideration for services provided. The court emphasized that the UDF is collected for the specific purpose of funding or financing the costs of upgradation, expansion, or development of airports and is not related to any service provided to passengers.3. Applicability of the decision in Consumer Online Foundation v. Union of India to the current case:The court reiterated that the decision in Consumer Online Foundation is decisive about the nature of the development fee collected under Section 22A. The development fee is a statutory exaction and not a fee or tariff for services rendered. The court noted that there is no contractual relationship between passengers and airport operators regarding the development fee, and the fee is levied and collected as a statutory obligation.4. Distinction between charges under Section 22 and Section 22A of the Airports Authority of India Act, 1994:The court highlighted the distinction between charges, fees, and rent collected under Section 22 and the development fee collected under Section 22A. Charges under Section 22 are for services and facilities provided by the Airports Authority, whereas the development fee under Section 22A is a statutory levy for specific purposes mentioned in the Act. The court concluded that the development fee is not a consideration for services provided and, therefore, not subject to service tax.Conclusion:The Supreme Court upheld the CESTAT's orders, holding that the development fee collected by airport operators under Section 22A of the Airports Authority of India Act, 1994, is a statutory levy and not subject to service tax under the Finance Act, 1994. The revenue's appeals were dismissed.