TaxTMI 
TaxTMI 
2018 (11) TMI 234
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.... airport so constructed. Appellant herein during the period and prior authorized to charge user development fee based upon the correspondence with the Ministry of Civil Aviation and discharge the same. Subsequently, they were advised that no service tax is required to be paid on user development fee (UDF). Accordingly, appellant filed the refund claim for the amount discharged by them as service tax during the period April, 2008 to December, 2008. The Revenue Authorities issued a show cause notice dated 08.04.2009 seeking to levy of service tax on the UDF charges so collected by the appellant and also proposing to reject the refund claim filed by the appellant. Appellant submitted a detailed reply along with various documents and contested the issue on merits as well as on limitation. The Adjudicating Authority did not agree with the contentions raised and confirmed the demands raised with interest and imposed penalties and appropriate the amounts paid by the appellant. 3. Learned Counsel submits that the fee collected by the appellant is a user development fee and is not a consideration for provision of any services and hence, no tax is payable. It is his submission that identica....
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....e Act, 2010 wherein, the definition of "Airport services" has been amended to indicate that all services provided entirely within the airport premises or civil enclave would fall under the "airport services", and the provisions of Section 65A shall not apply to any such service provided within the airport. It is his further submission that the period prior to 01.07.2010 any taxable service which is defined under Section 65 of the Finance Act, 1994, is if provided within an airport, was classified as per the provisions of Section 65A of the Finance Act, 1994 hence prior to 01.07.2010, every service provided by an airport authority or any person authorized by it, would have qualified for tax under the different definitions. It is his submission that extended period of limitation cannot be invoked in the case. 4. Learned Departmental Representative after taking us through the entire case records, submits that appellant herein functioning as is licensee of Aerodromes. It is his submission that the airport at Shamshabad is nothing but an Aerodrome and can be licensed by the authorities for operating the Aerodrome. He would then draw our attention to the granting of the license and the ....
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....hat the said amount was held to be taxable under Finance Act, 1994. He would submit that the decisions of the Hon'ble High Court of Kerala in the case of Cochin International Airport Ltd., are different as in that case it was user fee while in the case in hand it is user development fee. He reiterated the findings and submits lower authorities are correct and impugned order does not require for any interference. 5. On careful consideration of submissions made by both sides and perusal of records, it transpires that the issue is regarding taxability of an amount collected as user development fees under airport services. It is the case of the Revenue in the show cause notice that this user development fees is towards enhancement of various facilities and amenities to the passengers, service to be rendered while, it is the case of the appellant that user development fees is not towards any specific services that are to be rendered to any passenger embarking from the international airport at Hyderabad. 6. The Adjudicating Authority in the Order-in-Original has held against the appellant and the reasoning thereof is summarized as under: "a) UDF charges collected by the appellants wou....
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....ggregation - transactions are not restricted to taxes and taxable consideration. A de novo adjudication following the setting aside of the original order is not to be restricted to an analysis of the decision of the remanding authority. The adjudicating authority has merely gone through the motion of discussing the various citations referred to in the remand order instead of proceeding in accordance with the direction of the Tribunal. The Tribunal had drawn specific reference to the cited judgments to enable the adjudicating authority to render an informed finding keeping the following proposition in mind: whether a statutory levy "compulsory extraction" intended for a public purpose that does not benefit the individual subject to the levy is a taxable consideration for service within the scope of section 65 (105)(zzm) of Finance Act, 1994. That direction has not been complied with. We also note that the show cause notice, too, is silent on the nexus between "development fee" and consideration for a taxable service; it has proceeded on the assumption that the appellant, being a airport operator and subject to service tax, is required to pay tax on the entirety of its collection. Th....
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....n above, in the case in hand the appellant has made out the case in their favour. 8. In view of the facts and circumstances of this case and the judicial pronouncement on the same issue, we hold the impugned order is unsustainable and liable to be set aside and we do so. The impugned order is set aside and appeal is allowed with consequential reliefs if any. M.V. RAVINDRAN MEMBER (JUDICIAL) (Order per: P. Venkata Subba Rao) 9. The question to be examined is whether the User Development Fee collected by the appellant in this case is exigible to service tax or it is not considering the judicial precedents in the case of Mumbai International Airports Ltd (supra), Cochin International Airport Ltd. (supra) and the relevant legal provisions. This would require us to examine if the User Development Fee collected by the appellant in this case is the same as the fees collected in the aforesaid two cases. It also needs to be examined whether or not the UDF is being collected from the passenger to provide services. The following are the various fees to be considered to examine this case in its right perspective. Fee Authority for collection Purpose Remarks A Developm....
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....ch rate as the Central Government may specify. The airport licencee shall utilise the fees so collected for the infrastructure and facilitation of the passengers: Provided that the rate of fees in respect of major airports shall be as determined under clause (1) of sub-section (1) of section 13 of the Airports Economic Regulatory Authority of India Act, 2008 (27 of 2008)". 89. User Development Fee -The licensee may, - (i) levy and collect at a major airport the User Development Fee at such rate as may be determined under clause (b) of sub-section (1) of section 13 of the Airports Economic Regulatory Authority of India Act, 2008; (ii) levy and collect at any other airport the User Development Fees at such rate as the Central Government may specify. A. Development fee (DF) 11. The question of leviability of Service Tax on the Development Fee levied under Section 22A of the Airports Authority of India Act, 1994 was examined by the Central Board of Excise and Customs in 2011 and it clarified through letter F.No. 106/Commr (ST)/2009 dated July 8, 2011 as follows: 'Representations have been received seeking clarification regarding the leviability of Service Tax on the Deve....
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....ollected. They were also of the view that the DF collection is a mode of capital funding for the project and in the absence of rendering any service, no Service Tax is liable to be paid. However, the department was of the view that the appellant was allowed to collect DF on the condition that such receipts are treated as capital receipts for the future expansion of the airport. Therefore, the consideration received as fees from the departing passengers are in relation to taxable services rendered to them or to be rendered by the appellant. Since the appellant was paying Service Tax on passenger Service Fee and User Development Fee, which are statutory levies imposed under Rules 86 and 89 of the Air Craft Rules, 1934, on DF collected also the appellant is liable to pay Service Tax. Accordingly, a show cause notice dated 18-4-2011 was issued to the appellant proposing to classify the services rendered by the appellant to the departing passengers under category of Airport Services as defined under Section 65(3c) read with Section 65(105)(zzm) of the Finance Act, 1994 and to demand Service Tax amounting to Rs. 54,68,47,002/- on the DF collected during the period April, 2009 to January,....
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.... dispute that Service tax is leviable on it. C. User Fee/ User Development Fee collected by the Cochin International Airport Ltd (CIAL) through a decision of its Board of Directors 17. This fee was collected by CIAL to enhance their revenue and cope with the expenditure and debt servicing. It has been recorded by Tribunal Bangalore that this fee itself is held by Hon'ble High Court of Kerala to be unauthorized and not a quid pro for any service rendered to the passengers. Therefore, it was held that no Service tax can be levied on the same. This decision of the Tribunal was upheld by the Hon'ble High Court of Kerala. The relevant extracts are below: Cochin International Airports Ltd. 2007 (7) S.T.R. 468 (Tri. - Bang.) 3.1 The appellants have been collecting 'Users Fee' at the rate of Rs. 500/- per outgoing international passengers. It is on record that at the 30th Meeting of the Board of Directors of the appellant company CIAL held on 27-3-2000, it was decided to collect users development fee for enhancing the revenue of the airport to cope up with the expenditure and debt servicing. It is very clear that this fee is not a quid pro quo for any service rendered by the appellan....
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.... the respective airlines who discharge the service tax liability independently. Services such as air traffic services including flight information service, alerting services, air traffic advisory services, safety services, etc., are rendered to the airlines by the Airport Authority of India. Thus, we find that the collection of the 'users fee' from outgoing international passengers had no relation whatsoever to any services rendered by the appellants. We were further informed that consequent to the Kerala High Court's decision, the appellants stopped collection of the 'users fee' from the outgoing international passengers. In these circumstances, we hold that the appellants are not liable to pay any Service Tax on the 'users fee' under the category of 'Airport Service'. Hence, we set aside the impugned order and allow the appeal with consequential relief. Cochin International Airports Ltd. [2009 (16) S.T.R. 401 (Ker.)] 2. Admittedly the amount collected which is subject matter of levy is the "users fee" collected by the Airport at the rate of Rs. 500/- for every outgoing international passenger. Neither domestic passengers nor international passengers reaching the Airport from ....
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....dered to the outgoing international passenger. Admittedly all passengers leaving the Airport and arriving from outside India receive the same services and if any service is to be charged, the same must be charged on all. Further, ground handling services in the Airport are rendered by Air India and the traffic and other operational matters are handled by Airport Authority. The Tribunal noticed that for the specific services rendered by these agencies, service tax is also collected and remitted by them. Even though Airport is also rendering services to the passengers like restaurants, Air conditioning, facility for foreign exchange transactions by allowing Branches of Banks and other dealers to operate, duty free shop for incoming and outgoing passengers to purchase articles etc., service tax can be demanded for such services only when Airport collects service charge for any of the services rendered by them. A Single Judge of this court in the judgment reported in a batch case namely, OP. No. 13451/1996 and connected cases held that similar fee collected by the Kozhikode Airport Authority is without any justification. Even though appeal was filed against the said judgment before the....
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....or the provision of passenger amenities, services and facilities and will be used for the development, management, maintenance, operation and expansion of facilities at the Airport directly or as a part of the cost of tickets in accordance with Article 10.2. This Article deals with 'Regulated Charges' which are listed in Schedule 6 of the Agreement, which, inter alia, says: "HIAL will be allowed to levy User Development Fee w.e.f Airport Opening Date, duly increased in the subsequent years with inflation index as set out hereunder, from embarking domestic and international passengers, for the provision of passenger amenities, services and facilities and the UDF will be used for the development, management, maintenance, operation and expansion of the facilities at the airport." The same Schedule also empowers the appellant to collect Passenger Service Fee as per the prevailing PSF at the other AAI airports and it further states that it is inclusive of the cost of security expenditure on the Central Industrial Security Force (CISF). 21. The definition of the UDF in the concession agreement under which the appellant operates and its details in Schedule 6 of the Agreement clearly sp....