Custom, Excise & Service Tax Tribunal
Gmr Hyderabad International Airport ... vs Hyderabad-Ii on 2 November, 2018
Appeal No. ST/270/2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Appeal No. ST/270/2010
(Arising out of Order-in-Original No. 44/2009 - ST dated 28.10.2009
passed by Commissioner of Customs, Central Excise and Service
Tax, Hyderabad)
M/s GMR Hyderabad International Airport
Ltd., .....Appellant(s)
Vs.
Commissioner of Customs, Central Excise
& Service Tax, Hyderabad - II .....Respondent(s)
Appearance
Shri G. Shivadass, Advocate for the Appellant.
Shri Arun Kumar, Deputy Commissioner (AR) for the Respondent.
Coram:
Hon'ble Mr. M.V. RAVINDRAN, MEMBER (JUDICIAL)
Hon'ble Mr. P. VENKATA SUBBA RAO, MEMBER (TECHNICAL)
Date of Hearing: 05/07/2018
Date of Decision: 02/11/2018
FINAL ORDER No. A/31386/2018
[Order per: M.V. Ravindran]
This appeal is directed against Order-in-Original No.
44/2009 - ST dated 28.10.2009.
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2. The relevant facts that arise for consideration, after
filtering out unnecessary details are appellant herein constructed the
Rajiv Gandhi International Airport at Shamshabad under "Build Own
Operate Transfer" scheme (BOOT) arrangements by an agreement,
on entered with the authorities. By the said agreement completion of
the international airport they were granted an exclusive right and
privilege to carry out development, design, financing, construction,
commissioning, maintenance, operation and maintenance of green
field international 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.
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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 identical issue is decided by the Mumbai Tribunal in
the case of Mumbai International Airport Pvt. Ltd., Vs. CST, Mumbai
[2016-TIOL-2103- CESTAT-Mum]. It is his further submission that this
view is supported by the decision of the Hon'ble High Court of Kerala
in the case of Cochin International Airport Ltd., [2009 (16) STR 401]
the Hon'ble High Court dismissed the appeal filed by the Revenue
against the Tribunal's decision in the case of Cochin International
Airport Ltd. [2007 (7) STR 468]; High Court held that user's fee
collected by the Airport in that case was only for enhancing Revenue
of the airport and not for any service rendered to passengers and
upheld the decision of the Tribunal. It is his further submission that
UDF is really in the nature of cess or a tax for generating Revenue for
the specific purposes mentioned in Section 22A of the AAI Act. He
would submit that the Apex Court in the case of Consumer Online
Foundation [2011 (5) SCC 360] has held that the development fee
levied under Section 22A of the AAI, Act is not charges or any other
consideration for services for the facilities provided by the airport
Authority, but a cess or a tax for generating Revenue for specific
purpose. It is his further submission that there is no dispute that
appellant has not collected any service tax component from the
passengers on UDF hence in the extreme case the amount being a
development fees tax liability does not arise. It is his further
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submission that the Adjudicating Authority has mis-directed the issue
as to that the charges which are paid by the passengers are for
providing passenger, amenities, services for services like passenger
amenities, toilets, rest rooms, passenger lounges, securities etc. It is
his submission that no provision for levy of service tax is found by the
Finance Act, 1994 on perception of either party to an activity or
transaction is contained in the said Finance Act or any rules issued
there under. It is his submission that appellant herein is discharging
service tax on other various taxable services rendered by them like
rental services, cargo handling services etc under the category of
Airport services, hence the UDF is not towards provision of any
services, and no service tax is leviable. It is his submission that
provisions of Section 65 (105) (zzm) has to be understood and
interpreted in the light of the amendments made vide Finance 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
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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
conditions thereof and submit that provision of Rule 88 indicates for
collection of fee called passenger services fees from the embarking
passengers and Rule 89 talks about the collection of User
Development fee by the licensee. He would submit that the entire
user development fees is nothing but an amount collected for
extending or enhancing the various services like passenger lounges,
passenger amenities, toilets, rest rooms and various other facilities
inside the Aerodrome. It is his submission that even the agreement
entered by the appellant with the authorities, indicates user
development fees shall be for provision enhancing of passenger
amenities services and facilities and the same will be used for
development, management, maintenance and operation and
expansion of facilities at the airport. It is his submission that this in
itself indicates that the user development fees is nothing but an
amount collected for rendering various services. Subsequently, he
would draw our attention to the decision of the Tribunal in the case of
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Appeal No. ST/270/2010
Mumbai International Airport Pvt. Ltd., [2016 (46) STR (707)] to
submit that initially the Bench held that the amounts collected by
airport authority is nothing but development fee and used for funding
and financing caused by cost escalation and development of the fee
and categorically held that the activity of providing access by the
airport etc., is taxable. It is his submission that the Tribunal in the
cited decision, after holding so, remanded the matter back to the
Adjudicating Authority, wherein, the Adjudicating Authority again
confirmed the demands was raised. It is his submission that there is
a difference between development fees and user development fees.
He would further submit that the board by Circular No.
106/Commr(ST)/2009 dated 08.07.2011 specifically stated that
service tax is paid by the various airports on passenger services fee
and user development fees but no tax paid on the development fees.
It is his submission that board itself has categorically clarified that
passenger service fee, user development fee and development fee
are different and the development fee is to be taxed under airport
services. He relied upon the decision of the Supreme Court in the
case of P.C. Paulose, Sparkway Enterprises [2011 (21) STR 353] as
to taxability of the amount collected as "Airport admission ticket
charges" and submit that 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
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Appeal No. ST/270/2010
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 would be utilized for
development and management, maintenance, operation and expansion
facility at the airport. Hence the services fall under the category of Airport
Service.
b) Evidently, the collection of UDF by the appellant is in lieu of
development, management, maintenance, operation, expansion of toilets,
restrooms etc. for the purpose of passengers. As the appellant is already
collecting and discharging service tax on retail outlets, duty free shops
under Airport services, in same way on the UDF collected, the appellant is
liable to discharge service tax under airport service.
c) The ratio of the decision in Cochin International Airport Vs. CCE,
Kochi is not applicable to the fats of the present case as collection of such
fee was unauthorized in the state of Kerala.
d) There is a quid pro quo between the passengers and the appellant
in the present case. This is clearly established at the consideration received
towards the provision of service and not otherwise.
e) There is no doubt that the amount collected by GMR is a regulated
charge. Merely because it is a regulated charge, the true character of UDF
cannot be denied, nor there is any exemption under service tax law for such
regulated charge.
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f)Cum tax benefit cannot be extended in the absence of any evidence to show
that no service tax has been collected from the embarking passengers."
7. We find that the entire dispute in this case is now resolved
by the decision of the Tribunal in the case of Mumbai International
Airport Pvt. Ltd., [2016-TIOL-2103-CESTAT-Mum.]. This order was
passed by the Tribunal after Adjudicating Authority on remand has
confirmed the demands raised. In the said decision (wherein one of
us M.V. Ravindran was a Member), has recorded that the entire issue
as it emanated from the beginning and ending in remand by the Final
Order No. A/1718/2013 [2013-TIOL-1487-CESTAT] and subsequent
adjudication order passed on 14.02.2014. We find that the Tribunal in
the case of Mumbai International Airport Pvt. Ltd., (Second order)
relying upon the decision of the Tribunal in the case of Cochin
International Airport held as under:
"7. It appears that the adjudicating authority has concluded that the levy
permitted to be collected by the appellant, not being tax, must necessarily be
a consideration for services rendered. The world of monetary transaction is
not susceptible binary disaggregation - 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. These flaws render the notice and demand to be not tenable
and the demand would fail on this count itself.
8. The tax authorized to be collected as per section 65(105)(zzm) of Finance
Act, 1994 after 1st July 2010 is on service:
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Appeal No. ST/270/2010
"to any person, by airport authority or any other person, in any
airport or a civil enclave"
for the period prior to that was:
"to any person, by airports authority or any person authorised by it, in
an airport or a civil enclave"
9. Undoubtedly, for exigibility to tax, the service must be rendered to a
person by the specifically described service provider within an airport. The
scope of the activities of the appellant vis-a-vis passengers who bear the
burden of "development fee" needs examination. Passengers in an airport
are individuals who intend to travel by an airline that 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 no assertion in the impugned
proceedings that the passenger is required to effect payment for any of these
activities. These facilities were available without any additional charge
before the imposition of "development fee" and continue to be available
after its quashing. No additional benefit accrued to the passenger during the
period of levy of "development fee". These are basic facilities that is
inherent in the civil aviation sector in which the appellant, a non-public
sector entity, is a recent entrant."
It can be seen from the above reproduced paragraphs of the
decisions that the Bench considered the entire issue in its entirety as
is argued before the Bench. Learned Departmental Representative
prying to distinguish the charges levied, in the case in hand and the
charges which were levied by Mumbai International Airport Pvt. Ltd.,
are different, will not carry the case any further as in the first order
Tribunal itself, it was held that "charges collected either by way of levy
of Development Fee, user fee is not in respect of any particular
services rendered by the Airport Authority" [in paragraph 5.2 of the
decision as reported at [2013-TIOL-1487-CESTAT-Mumbai]. Since
the entire issue has been considered by the Tribunal in the second
judgment reproduced herein above, in the case in hand the appellant
has made out the case in their favour.
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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 Purpose Remarks
collection
A Development Section 22A of Funding or Financing the Leviability of
Fee the Airports costs of upgradation, Service tax was the
Authority Act, expansion or development issue under
1994 (as or the airport or consideration in the
amended in establishment of a new case of Mumbai
2003) airport or investment in International
equity by the Airports Airports Ltd.
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Appeal No. ST/270/2010
Authority
B Passenger Rule 88 of the Not defined in the Rules or Leviability of
Service Fee Aircraft Rules, in the parent Act. Service tax not
1937 framed disputed.
under the
Aircraft Act,
1934
C User Fee Decision of the Enhance the revenue of Leviability of the
(also referred Board of the airport to cope with Service Tax was
to as user Directors of the the expenditure and the issue in
development Cochin debt servicing. Not as a consideration in the
fee) International quid pro quo for any case of Cochin
collected in Airports Ltd. service rendered to the International
Cochin passengers. Airport Ltd.
International
Airport
D User Rule 88 of the Not defined in the Rules Leviability of
Development Aircraft Rules, or in the parent Act. The Service tax is the
Fee 1937 framed concession agreement issue in the
under the defines it. present case.
Aircraft Act,
1934
10. The relevant legal provisions are reproduced below:
AIRPORTS AUTHORITY ACT, 1994
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.
AIRCRAFT Rules, 1937
88. Passenger Service Fee - The airport licensee may collect fees to be
called the Passenger Service Fee from the embarking passengers at such
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)".
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Appeal No. ST/270/2010
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 Development Fee charged at Airports
particularly at Mumbai and Delhi by Mumbai International Airports Ltd and
Delhi International Airports Ltd.
The matter has been examined. In this regard, attention is drawn to letter Dy.
No. 106/Commr (ST) 2009 Pt (TRU) dated 13.10. 2010 circulated by DGST,
Mumbai for raising prospective demands in the matter. Service tax is being
paid on the Passenger Service Fee (PSF) and User Development Fee
(UDF) and a distinction is sought to be drawn between these and the
DF. The stated purpose of permitting the levy of DF is to fund for
upgradation, expansion or development of the airport.
12. The issue of leviability of service tax on the Development
fee was also the matter of consideration in the case of Mumbai
International Airports Ltd. In that case, MIAL was paying the Service
Tax in respect of the Passenger Service Fee (PSF) and the User
Development Fee (UDF) and the Revenue wanted to charge Service
Tax on the Development Fee (DF) also and the CESTAT (Mumbai)
formulated the question and remanded the matter back to the
adjudicating authority. The relevant portion of the order is below:
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Appeal No. ST/270/2010
Mumbai International Airports Ltd. 2016 (46) S.T.R. 707 (Tri. - Mumbai)
2. The appellant, M/s. Mumbai International Airport Pvt. Ltd. (MIAL in short)
are a joint venture company undertaking the operations of Mumbai
International Airport and are registered with the Department for Service Tax
purpose under various categories of taxable services. The appellant was
collecting Development Fee (DF in short) from the every departing
passenger in the airport in terms of Section 22A of the Airports
Authority of India Act, 1994 (AAI Act in short). The first such levy of DF
was authorized by the Government of India w.e.f. 1-4-2009 and the Ministry
of Civil Aviation vide letter dated 27-2-2009 had conveyed the approval of the
Central Government under Section 22A of the AAI Act, 1994 for levy of DF at
Mumbai Airport @ Rs. 100/- per departing domestic passenger and Rs. 600/-
per departing International passenger w.e.f. 1-4-2009. However, the
appellant did not discharge any Service Tax liability on the said DF on the
ground that the purpose of collection of DF is funding and financing the cost
of up-gradation, expansion or development of the airport and the appellant
does not have any obligation to provide any services to the passengers from
whom the DF is collected. 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, 2011 under the provisions of
Section 73 of the Finance Act, 1994. The said notice also proposed to collect
interest on the said Service Tax demand under Section 75 and to impose
penalties on the appellant under Sections 76, 77 and 78 of the Finance Act,
1994.
-------
7. Thus, the appeal is allowed by way of remand. The stay petition is also disposed of.
13. After de-novo adjudication, the matter came up again in appeal before CESTAT, Mumbai, and it was decided that no Service tax can be levied on Development Fee in the final order reported in 2017 (51) S.T.R. 280 (Tri. - Mumbai). The relevant extract of the head note is as follows:
Airport services - Taxability - Development fee - Service to be taxable must be rendered within an airport - Contractual nature of relationship with 13 Appeal No. ST/270/2010 passenger by ticket provides access to various facilities like access to airport, check-in, security, etc., which are available without any additional charge before imposition of development fee - No additional benefit to passenger by payment of development fee - Fee collected not for any service rendered but only to augment financial situation of appellant - Amount so collected placed in an escrow account, is a levy for future establishment and to be used for purpose intended in Section 22A of Airports Authority of India Act, 1994 - No services rendered for such fee - Service Tax on such fee not imposable under the category of 'airport services'
14. Thus, the leviability of the Service Tax on the User Development Fee under Rule 89 of the Aircraft Rules, 1937 was not an issue before the CESTAT, Mumbai in the aforesaid case but only leviability of Service Tax on the Development Fee levied under Section 22A of the Airports Authority Act. It is also recorded in the order of the CESTAT that on the User Development Fee, Service tax was being paid.
15. Thus, as far as Development Fee is concerned, the CBEC took a view that Service Tax is leviable on it but this view has not been upheld by the CESTAT, Mumbai in the above order. CBEC's letter states that as far as Passenger Service Fee and User Development Fee are concerned, Service Tax is being paid, which, therefore, appears to have been the general practice. The order of CESTAT Mumbai also confirms that MIAL has been paying Service Tax on PSF and UDF.
B. Passenger Service Fee (PSF)
16. As far as PSF is concerned, there is no dispute that Service tax is leviable on it.
14
Appeal No. ST/270/2010 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 appellant to the passengers. In fact, a similar fee was being collected at Calicut Airport. That collection in Calicut Airport was challenged in the Kerala High Court and the Kerala High Court held that the collection of such a fee is unauthorized. In the case before the Kerala High Court, the amount was collected on behalf of the Malabar International Airports Development Society. In the present case the fee is collected by the appellant but this will not make the said decision of the Kerala High Court inapplicable to the present case. The High Court has held that the Airport Authority alone can charge fee for various services. Moreover, the services rendered by the airport authority are actually services rendered to airliners. Therefore, such a levy can be made from the airliners and not from passengers. The High Court has given such a finding while interpreting Section 17 of the National Airports Authorities Act 1985. In the present case also, the so-called 'user development fee' has not been collected by Airport Authority of India. The purpose of collecting the fee is only to augment the financial situation of CIAL. It is not the case of the Revenue that the amount collected by way of 'users fee' is utilized by the Airport Authority. The appellants have stated that all these services to passengers are rendered by the airliners and also the Airport Authority of India. All ground handling services at the airport are rendered by Air India. The Air Traffic Services including ground safety services in coordination with other agencies at the airport are rendered by Airport Authority of India. All the above services attract Service Tax and the same is being duly remitted for such services by the service providers. The Adjudicating Authority has simply 15 Appeal No. ST/270/2010 made a statement that the 'users fee' collected has a nexus with the service rendered by the appellant. He has not discussed what service has been rendered by the appellants to individual passengers for collecting the 'users fee'. The appellant is a company registered under the Companies Act and has established a private airport for the benefit of public. The Government of Kerala is one of the shareholders of the Company. The appellant is providing certain facilities to airlines such as landing facilities, parking facilities, x-ray baggage inspection facilities, etc. these services topassengers are separately rendered by 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 any foreign destination is liable to pay users fee. The demand of service tax is under Section 65(105)(zzm) which is as follows :
"S.65(105) "taxable service" means any service provided or to be provided:-
(zzm) to any person, by airports authority or any person authorised by it, in an airport or a civil enclave."
Counsel for the appellants referred to definition of "airports authority"
contained in sub-section (3d) of Section 65 and contended that a private airport owned and managed by the respondent is also covered by the definition. The definition clause reads as follows :
"S.65(3d) "airports authority" means the Airports Authority of India constituted under Section 3 of the Airports Authority of India Act, 1994 (55 of 1994) and also includes any person having the charge of management of an airport or a civil enclave."
On going through the above provision, we are of the view that if the levy is permissible, then respondent certainly would be liable because by virtue of the inclusive definition respondent-company owning and managing the Airport answers the description of Airports Authority. The next question to be considered is whether respondent is liable for service tax on the users fee collected from outgoing international passengers. As already noted, no users fee is collected from any domestic passenger or any international passenger landing at the Airport from a foreign destination. The amount charged is a flat figure of Rs. 500/- from every outgoing international passenger. The respondent's case that the amount collected is not for any service rendered is obvious because services rendered to passengers are almost similar in nature and there is no reason why international passengers arriving from foreign destinations are exonerated. Further, domestic terminal of the Airport provides almost same services. However, no users fee is collected from any passenger travelling in the domestic sector. The Tribunal has referred to the decision taken by the Board of Directors of the respondent- 16
Appeal No. ST/270/2010 company in their meeting on 27-3-2000 when they decided to collect users development fee "for enhancing the revenue of the Airport to cope up with the expenditure and debt servicing". It is clear from the decision of the Board of Directors of the company that purpose is to augment revenue for the Airport and is not towards consideration for any service rendered 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 Division Bench, we are told that the Calicut Airport discontinued collection of users fee. Following this, the respondent also has stopped collection of users fee. The facts and circumstances of the case and the evidence clearly prove beyond doubt that the users fee collected is only for enhancing the revenue of the Airport and not for any service rendered to outgoing international passengers. Section 67 defining value of taxable services for charging service tax says that the value of service shall be gross amount charged by the service provider for the service provided to the recipient. Since collection of users fee is not for any specific service rendered by them, but is a flat rate of charge to one category of passengers namely, outgoing international passengers, it cannot be said that the amount so collected is by way of service charge. We, therefore, hold that the Tribunal rightly held that no service tax is payable for the users fee collected by the respondent. The appeals are accordingly dismissed.
D. User Development Fee (UDF): 18. The leviability of the Service Tax on the User
Development Fee which is levied under Rule 89 of the Aircraft Rules, 1937 was not the question under consideration nor has it been settled in the case of MIAL (supra) (where the Development Fund under Section 22 of the AAI Act was in question) nor in the case of CIAL. In the case of CIAL, a user development fee was levied by the Board of Directors of the company running the airport so as to enhance the Revenues of the company without any quid pro quo to the service rendered to the passengers. It has also been indicated in the Order 17 Appeal No. ST/270/2010 of the CESTAT Bangalore that the charging of UDF, itself, in that case was unauthorised.
19. In the present case, the User Development Fee (UDF) is a part of the concession Agreement entered into between the Appellant and the Government of India in 2004. At this stage, it may be pointed out that prior to 2009, the licensee of an airport could collect UDF under Rule 89 of the Aircraft Rules at the rates decided by the Government of India. After 2009, the Rules have been amended giving this power to Airport Economic Regulatory Authority in respect of major airports.
20. The Concession Agreement in respect of the Appellant defines 'User Development Fee' as the fee collected, as per the rules laid down by the GOI, from the embarking passengers for 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).
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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 spell out that this fee is collected from the embarking passengers for providing passenger amenities, services and facilities. There is an unmistakable direct link between what is being charged from the passengers to the service of providing amenities, services and facilities to them in this Agreement. How the money received for the service rendered is used by the service provider is irrelevant and what is essential to decide the leviability of the service tax is why the recipient is getting the money from the payer and in this case, it is for providing amenities, services and amenities to them. This is quite different from the User Fee (or User Development Fee) levied, possibly unauthorisedly, by the Board of Directors of the Cochin International Airports Ltd. explicitly to increase their revenue. Quite correctly, the CESTAT Bangalore, held that there is no quid pro quo with the service given to the passengers with such a charge and the same has been upheld by the Hon'ble High Court of Kerala. It is also quite different from the case of MIAL (supra) where the question was of leviability of Service Tax on the Development Fee levied under Section 22 of the Airports Authority of India Act (and the section does not talk about any service to the passengers but says it is a levy to help AAI).
22. Rule 89 of the Aircraft Rules (as they stood before 2009) required the rates of UDF to be approved by the Government of India. 19
Appeal No. ST/270/2010 The appellant submitted their proposal with necessary justification to the Government of India and after examining these, the Ministry of Civil Aviation of the Government of India, through their letter No. AV. 20015/3/2003-AAI dated 28th February 2008, approved the UDF at a rate of Rs. 1000/- per passenger. In continuation, the GOI sent another letter dated 19 March 2008 clarifying that the UDF shall be inclusive of applicable taxes, if any. Neither the proposals sent by the appellant nor the approval by the Government of India have, at any stage, modified the definition or the purpose of UDF set out in the Concession Agreement. It is also evident that GOI has contemplated this UDF to be inclusive of all taxes.
23. The argument of the Ld. Counsel that the amount collected as the UDF is not linked to the specific services provided to that passenger himself does not carry the appellant's case any further. It has been settled by the Hon'ble Apex court in the case of PC Paulose, Sparkway Enterprises [2011 (21) STR 353 (SC)] that airport admission ticket charges collected by the appellant as licensee of the AAI is leviable to service tax although these tickets are meant to provide the services in the airport and not linked to the service specifically provided to the buyer of the tickets. Similarly, in this case, as per the agreement, the UDF is meant to provide facilities and amenities to the passengers although the amount collected need not be specifically linked to the service provided to the individual passengers.
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24. I find no reason to hold that the UDF charged by the appellant in this case has no quid pro quo to the service provided to the passengers. I, therefore, find that Service Tax is leviable on the UDF charged by the appellant from the passengers. Since this amount is inclusive of all taxes, the amount so charged should be treated as inclusive of Service tax.
(P. Venkata Subba Rao) Member (Technical) Difference of opinion:
The following difference of opinion arising in this appeal needs to be referred to a 3rd member for resolving the issue.
i) Whether user development fee charged by the appellant in the case in hand, is taxable under the Finance Act, 1994 under the head of airport services as held by the Hon'ble Member (Technical) or not to be taxed as held by the Hon'ble Member (Judicial).
(Order pronounced on 02/11/2018 in open court) P. VENKATA SUBBA RAO M.V. RAVINDRAN MEMBER (TECHNICAL) MEMBER (JUDICIAL) Lakshmi....
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