Statutory airport levy is not service tax consideration where it lacks a nexus with services rendered.

User development fee collected under section 22A of the Airports Authority of India Act is treated as a statutory levy, not consideration for airport service under the service tax law, because service tax under section 67 applies only where there is a nexus between the amount charged and a service rendered. Its credit to an escrow account and the restrictions on its use for upgrade, expansion, or development do not change that character. The controlling point is that the levy is imposed by statute for a specified public purpose, rather than paid as contractual consideration for services to passengers. On that basis, it falls outside the ambit of taxable service consideration.

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Issues: (i) Whether user development fee collected under section 22A of the Airports Authority of India Act, 1994 constitutes consideration for "airport service" so as to attract service tax under the Finance Act, 1994; (ii) Whether the statutory character of the levy, its credit to an escrow account, and the regulatory restrictions on its use alter its non-taxable character as consideration for service.

Issue (i): Whether user development fee collected under section 22A of the Airports Authority of India Act, 1994 constitutes consideration for "airport service" so as to attract service tax under the Finance Act, 1994.

Analysis: The nature of the levy was already settled in the earlier decision dealing with section 22A. The levy was held to be a statutory exaction, not charges or any other consideration for services, and was described as being in the nature of a cess or tax for a specific purpose. Under section 67 of the Finance Act, 1994, service tax is attracted only where the amount charged is a consideration for the service provided. A taxable service therefore requires a nexus between the amount charged and the service rendered. User development fee, being collected de hors the facilities available at the existing airport and intended for upgradation, expansion, or development, lacks that nexus.

Conclusion: The user development fee is not consideration for airport service and is not liable to service tax.

Issue (ii): Whether the statutory character of the levy, its credit to an escrow account, and the regulatory restrictions on its use alter its non-taxable character as consideration for service.

Analysis: The levy remained statutory even though it was not deposited in the government treasury and even though collection was routed through an escrow mechanism. The relevant rules required separate accounts and regulatory monitoring of receipts and utilisation, showing that the funds retained a public and regulated character. The absence of treasury deposit did not convert the levy into consideration for a service, nor did the discretionary element in collection destroy its statutory nature. The controlling factor remained that the amount was raised under statute for a specified public purpose and not as payment for a service rendered to passengers.

Conclusion: The statutory and regulatory mode of collection did not make the levy taxable as service consideration.

Final Conclusion: The development fee was held to be a statutory levy outside the ambit of taxable consideration under the service tax law, and the revenue's challenge was rejected.

Ratio Decidendi: An amount levied under statute for a specific public purpose, without a contractual nexus to a service rendered, is not "consideration" for taxable service under section 67 of the Finance Act, 1994 and cannot be subjected to service tax merely because it is collected by an airport operator.

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