TMI Blog2023 (5) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Government from the embarking passengers under the provisions of Section 22A of the 1994 Act. The observations and findings are decisive about the nature of development fee, collected under Section 22A; they are statutory exactions and not fees or tariffs, as was contended by the Union of India. In fact, the court even underlined that the nature of the levy under Section 22A of the 2004 Act, in our considered opinion, is not charges or any other consideration for services for the facilities provided by the Airports Authority. This court, in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [ 2018 (2) TMI 1325 - SUPREME COURT] , ruled that to attract service tax levy, a taxable service has to be provided to a recipient, by a service provider, for a consideration and in the absence of any nexus to any service rendered, an amount charged, or value of service or goods provided without a consideration, would not be a taxing incident. The court held that any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hreshtha, Adv. Ms. Runjhun Pare, Adv. Mr. Kaustubh Singh, Adv. Mr. E. C. Agrawala, AOR Mr. Tarun Gulati, Sr. Adv. Ms. Richa Kapoor, AOR Mr. Kunal Anand, Adv. Mr. Kunal Kishor, Adv. Ms. Tusharika Sharma, Adv. Ms. Eesha Sharma, Adv. JUDGMENT S. RAVINDRA BHAT, J. 1. In all these appeals, orders of the Customs, Excise and Service Tax Appellate Tribunal Final Order No, ST/A/50064/2019-CUIDBI dated 18/01/2019 [by the Principal Bench, CESTAT, New Delhi]; Final Order No. A/88830- -88832/16/STB dated 28.01.2016 [by the Western Zonal Bench, CESTAT, Mumbai]; and Final Order No. A/30739/2019 dated 16.09.2019 [by the CESTAT Regional Bench at Hyderabad]. (hereafter CESTAT ) are impugned by the service tax authorities (hereafter the revenue ), who argue that user development fee levied and collected by the airport operation, maintenance and development entities (i.e., the Mumbai International Airport Pvt. Ltd., the Delhi International Airport Pvt. Ltd., and the Hyderabad International Airport Pvt. Ltd., (hereafter collectively called the assessees ) is subjected to service tax levy, under the provisions of the Finance Act, 1994 (hereafter the Act ). 2. All the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Authority of India Act, 1994 (55 of 1994) and also includes any person having the charge of management of an airport or civil enclave . 5. Section 68 (1) of the Finance Act provides that every person providing taxable service to any person shall pay service tax at the rate specified in section 66. Section 67 (1) of the Finance Act, provides that where service tax is chargeable on any taxable service with reference to its value then such value shall be the gross amount charged by the service provider for such service provided or to be provided by him. 6. The relevant provisions of the Airports Economic Regulatory Authority of India Act, 2008 and the Aircraft Rules, 1937 are extracted below: Section 13 of the Airports Economic Regulatory Authority of India Act, 2008 sets out the functions of the authority, and inter alia, reads as follows: 13. Functions of Authority. (1) The Authority shall perform the following functions in respect of major airports, namely:-- (a) to determine the tariff for the aeronautical services taking into consideration-- **************** (b) to determine the amount of the development fees in respect of major airports; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authority any facility for carrying on any trade or business at any airport, heliport or airstrip. Section 22A. The Authority may, after the previous approval of the Central Government in this behalf, levy on, and collect from, the embarking passengers at an airport, the development fees at the rate as may be prescribed and such fees shall be credited to the Authority and shall be regulated and utilized in the prescribed manner, for the purposes of- (a) funding or financing the costs of upgradation, expansion or development of the airport at which the fee is collected; or (b) establishment or development of a new airport in lieu of the airport referred to in clause (a); or (c) investment in the equity in respect of shares to be subscribed by the Authority in companies engaged in establishing, owning, developing, operating or maintaining a private airport in lieu of the airport referred to in clause (a) or advancement of loans to such companies or other persons engaged in such activities. III Contentions of the parties 7. Ms. Nisha Bagchi, learned counsel for the revenue, submits that assessees function as licensees of Airports. The airports are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the Central Government, meant for funding or financing the costs of upgradation, expansion or development of the airport at which the fee is collected; or establishment or development of a new airport in lieu of the existing airport or towards investment in the equity in respect of shares to be subscribed by the authority in companies engaged in establishing, owning, developing, operating or maintaining a private airport in lieu of the airport or advancement of loans to such companies or other persons engaged in such activities. It was also urged that the amounts cannot be termed as levy, because they are not deposited with the government treasury. 11. It was submitted that from a reading of Section 22A, it is clear that it allows for funding or financing the cost of upgradation, expansion or development of the airport at which the fee is collected and establishment or development of a new Airport in lieu of the airport at which the fee is collected. This is a pre-funding collection and imposed for the facility to be provided by the assessees and to be used for funding of project cost which ultimately would result in creation of better facilities and amenities for passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed by the Central Government (by two letters dated 9.2.2009 and 27.2.2009) respectively were ultra vires the AAI Act, and were not saved by Section 6 of the General Clauses Act, 1897. 15. It is submitted that in the above decision, there is no clear finding that DF is a tax or cess and the same was held to be ultra vires the AAI Act on the ground that the rate could not have been fixed by the Central Government, but only by making a rule by AERA which has not been done. In the present case, we are concerned with the levy of service tax on DF collected by the respondents from the passengers. Also in that decision, this court was not concerned with levy or otherwise of service tax on DF. It was argued that DF has not been collected as tax or cess and therefore, the contention that DF is a tax on which there cannot be any service tax is incorrect. The nature of DF is that these are the charges collected by the respondents for development of facilities for the use of the airport. In fact, the assesses contention was these are the charges for the use of the airport services by the passengers and is not a tax. 16. Learned counsel relied on the judgment reported as Krishi Upaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n airline which has the said airport as a scheduled port of call. The contractual nature of this relationship is enshrined in the ticket which provides access to the airport, process through check-in and security, space for waiting and necessary amenities and provision for boarding an aircraft. There is nothing to show that passengers have to make payments for any of these activities. These facilities were available without any additional charge before the imposition of development fee . Such services continue to be available after its quashing. No additional benefit accrues to the passenger during the period of levy of development fee. All facilities are basic facilities inherent in the civil aviation sector in which the appellant, a nonpublic sector entity, is a recent entrant. 20. It was emphasized that moving away from state control, airports entered the phase of regulatory control with the advent of the AAI Act. This transition also had to factor in the larger public interest in safety and security, which meant that some level of control, de-regulation was limited and confined to the financial aspects of airport management. Having created a statutory authority, the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued that in view of the declaration of law, CESTAT correctly held that the charges collected by the assesses under Section 22A of the AAI Act cannot be regarded as considered for services rendered. 24. Learned counsel submitted that the decision in Krishi Upaj Mandi Samiti (supra) is distinguishable. In that case, the court was concerned only with Section 9 (2) of the Rajasthan Agricultural Produce Markets Act, 1961, which was held not to relate to a statutory function but only a discretionary charge, i.e., renting of premises. Rent for immovable property is materially different from a collection under Section 22A of the AAI Act, which, according to this court, is in the nature of cess or tax and a compulsory exaction in Consumer Online Foundation (supra). 25. The assesses also rely on the decision of this court in Commissioner of Service Tax vs. Bhayana Builders (P) Ltd 2018 (1) SCR 1128 , where it was stated that under Section 67 of the Finance Act, 1994, not every amount charged by the service provider is taxable. Upon an analysis of Section 67, it was held that the amount charged should be for such service provided to be taxable. The court emphasized the connection b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22A of the 1994 Act. Such development fees levied and collected under Section 22A can also be utilized for funding or financing the costs of up-gradation, expansion and development of an existing airport at which the fees is collected as provided in clause (a) of Section 22A of the Act and in case the lease of the premises of an existing airport (including buildings and structures thereon and appertaining thereto) has been made to a lessee under Section 12A of the Act, the Airports Authority may meet the costs of up-gradation, expansion and development of such leased out airport to a lessee, but this can be done only if the rules provide for such payment to the lessee of an airport because Section 22A says that the development fees are to be regulated and utilized in the manner prescribed by the Rules. Since the lessee of an airport cannot be assigned the function of the Airports Authority to establish airports or assist in establishing private airports in lieu of the existing airports at which the development fees is being collected, the lessee cannot under sub-section (4) of Section 12A have the power of the Airports Authority under Section 22A of the 1994 Act to levy and collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as the airlines, passengers, visitors and traders doing business at the airport. But there can be no such contractual relationship between the passengers embarking at an airport and the Airports Authority with regard to the upgradation, expansion or development of the airport which is to be funded or financed by development fees as provided in clause (a) of Section 22A. Those passengers who embark at the airport after the airport is upgraded, expanded or developed will only avail the facilities and services of the upgraded, expanded and developed airport. Similarly, there can be no contractual relationship between the Airports Authority and passengers embarking at an airport for establishment of a new airport in lieu of the existing airport or establishment of a private airport in lieu of the existing airport as mentioned in Clauses (b) and (c) of Section 22A of the 1994 Act. In the absence of such contractual relationship, the liability of the embarking passengers to pay development fees has to be based on a statutory provision and for this reason Section 22A has been enacted empowering the Airports Authority to levy and collect from the embarking passengers the development fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d findings extracted above are decisive about the nature of development fee, collected under Section 22A; they are statutory exactions and not fees or tariffs, as was contended by the Union of India. In fact, the court even underlined that the nature of the levy under Section 22A of the 2004 Act, in our considered opinion, is not charges or any other consideration for services for the facilities provided by the Airports Authority. 30. By virtue of Section 67 of the Finance Act, the basis of charge is the value of taxable service. Section 67 as it stood, before amendment w.e.f. April 18, 2006, read as follows: 67. Valuation of taxable services for charging service tax. - For the purposes of this Chapter, the value of any taxable service shall be the gross amount charged by the service provider for such service provided or to be provided by him. ****************** ****************** Explanation 3.-For the removal of doubts, it is hereby declared that the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (i) in a case where the provision of ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be necessarily a consideration for the service provided which is taxable under the Act. By using the words for such service provided the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67. 33. On 02.08.2011, the Airports Authority of India (Major Airports) Development Fees Rules 2011 (hereafter the 2011 Rules ) came into force. They, by Rule 3, authorized the collection of development fees; by Rule 4 (1), an Escrow account had to be opened in respect of each airport into which the development fee collections were to be deposited; by Rule 4 (2), AAI is empowered to monitor and regulate the receipts and utilization of fees; by Rule 4 (3), various sub accounts were to be opened [(a) Development Fees Receipt Account; (b) Development Fees Statutory Dues Account; (c) Development Fees Disbursement Account; (d) Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as provision of service for the purpose of levy of service tax. 2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government treasury. Such activity is pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation otherwise it is only a discretionary function under the statute. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed. 38. The principal holding, so to say, was that the discretionary fee could be levied, and that there was no duty cast upon the Market Committees to allot/lease/rent the shop/platform/land/space to the traders . The second reason was that the amounts were credited to a market fund, which was later deposited in the government treasury, even after which it remained a market committee fund. 39. In the present case, undoubtedly, neither is there any compulsion to levy development fee nor is the collection conditional upon its deposit in the government treasury. However, the absence of these features in this court s opinion, does not render UDF any less a statutory levy. Firstly, the ruling in Consumer Online Foundation (Supra) is conclusive that UDF is a statutory levy. Secondly, the collection is not premised on rendering of any service. Thirdly, the amounts collected are deposited in an escrow account, not within the control of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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