2018 (11) TMI 234 - AT - Service Tax

Levy of Service tax - user development fee (UDF) - airport services - Build Own Operate Transfer scheme (BOOT) - rejection of refund claim - 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 - Difference of opinion - matter refereed to third bench. The following difference of opinion arising in this appeal needs to be referred to a 3rd member for resolving the issue 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)?

Summary

Issues Involved:
1. Taxability of User Development Fee (UDF) under airport services.
2. Interpretation of statutory provisions and judicial precedents regarding UDF.
3. Applicability of service tax on UDF based on the nature of the fee and its utilization.

Detailed Analysis:

1. Taxability of User Development Fee (UDF) under Airport Services:
The primary issue revolves around whether the User Development Fee (UDF) collected by the appellant is subject to service tax under the category of airport services. The appellant argued that UDF is not a consideration for any specific services rendered to passengers, but rather a fee for generating revenue for the airport's development and maintenance, thus not taxable. The Revenue contended that UDF is collected for providing various passenger amenities and services, making it taxable under airport services.

2. Interpretation of Statutory Provisions and Judicial Precedents:
The appellant cited several judicial precedents to support their claim, including the Mumbai Tribunal's decision in Mumbai International Airport Pvt. Ltd. v. CST, Mumbai [2016-TIOL-2103-CESTAT-Mum] and the Kerala High Court's decision in Cochin International Airport Ltd. [2009 (16) STR 401]. These cases held that user fees collected by airports were not for specific services rendered to passengers but for enhancing revenue, thus not subject to service tax. The appellant also referenced the Supreme Court's decision in Consumer Online Foundation [2011 (5) SCC 360], which characterized development fees as a cess or tax for specific purposes, not as charges for services.

3. Applicability of Service Tax on UDF Based on the Nature of the Fee and Its Utilization:
The Adjudicating Authority held that UDF collected by the appellant was for the development, management, maintenance, operation, and expansion of airport facilities, falling under the category of airport services and thus taxable. The authority also noted that the appellant was already paying service tax on other airport services like rental services and cargo handling. The Tribunal, in its analysis, referred to the precedent set by the Mumbai International Airport Pvt. Ltd. case, which concluded that development fees were not taxable as they were not for specific services rendered to passengers.

Separate Judgments Delivered:
- Member (Judicial): The Member (Judicial) concluded that the UDF is not taxable under airport services, aligning with the Tribunal's decision in the Mumbai International Airport Pvt. Ltd. case, which held that development fees were not for specific services rendered and thus not subject to service tax.
- Member (Technical): The Member (Technical) disagreed, holding that UDF is taxable under airport services. The Member (Technical) emphasized that the UDF collected was for providing passenger amenities, services, and facilities, establishing a direct link between the fee and the services rendered to passengers.

Conclusion:
The Tribunal's decision reflects a difference of opinion between the Members. The Member (Judicial) found in favor of the appellant, holding that UDF is not taxable under airport services, while the Member (Technical) held that UDF is taxable. Consequently, the matter was referred to a third member to resolve the issue of whether UDF charged by the appellant is taxable under the Finance Act, 1994, under the head of airport services.