WHETHER USER FEE COLLECTED BY AIRPORT FROM INTERNATIONAL PASSENGERS IS LIABLE TO SERVICE TAX?

[Mr. M. GOVINDARAJAN]

   Section 65(3d) of the Finance Act, 1994 defines the terms 'airport authority' as 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.  Section 65 (3c) defines the term 'airport' as having the meaning assigned to it in clause (b) of section 2 of the Airports Authority of India Act, 1994 (55 of 1994).

    Section 65(105)(zzm) defines the taxable service as any service provided or to be provided  to any person, by airports authority or any person authorized by it, in an airport or a civil enclave.

    The Airport collects 'user fee' at the rate of Rs.500/- for every outgoing international passengers.   Such fee is not levied from domestic passengers and international passengers reaching the Airport from any foreign destination.  The Department demanded service tax on user fee levied by the Airport.   The Tribunal in 'Commissioner of Central Excise V. Cochin International Airport Limited' - 2007 (7) STR 468 (Tri. Bang) held that the respondent is not liable to pay service tax on 'user fee' collected at the rate 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 user fee is not collected from any passenger travelling in the domestic sector.   The Tribunal mainly relied on the decision taken by the Board of Directors of the respondent company who decided to collect users' development fee for enhancing the revenue of the Airport to cope up with the expenditure and debt servicing. The Tribunal noticed that for the specific services rendered by those 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.

    Aggrieved against the order of the Tribunal the Department filed an appeal before High Court, Kerala in 'Commissioner of Central Excise V. Cochin International Airport Ltd.,' - [2009 -TMI - 34974 - KERALA HIGH COURT].

    The respondent contended that by virtue of the decision of the Supreme Court in 'Commissioner of Customs & Central Excise V. Hongo India (P) Ltd.,' - [2009 -TMI - 32749 - SUPREME COURT] the High Court has no power to condone the delay in appeal filed under Section 35G of the Central Excise Act.  The Department contended that the judgment of the Supreme Court is got through the amendment granting authority to High Court to condone delay in filing appeal.

    The Court after considering the submissions of both sides held as follows:

    • If the levy of user fee is admissible then the 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;

    • No user fee is collected from any domestic passenger or any international passenger landing at the Airport from a foreign destination;

    • The purpose of the decision of Board is, therefore, to augment the revenue of the Airport and not on consideration for any service rendered to the outgoing international passengers;

    • Since all passengers are leaving the Airport arriving from outside India receive the same services and if any service is to be charged, the same must be charged on all;

    • A single Judge of this Court in OP 13451/1996 held that similar fee collected by Kozhikode Airport is without any justification;

    • The respondent stopped in collecting the user fee;

    • The facts and circumstances of the case and evidence clearly proved 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 of the Finance Act, defining the 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 it 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 charges.

The High Court dismissed the appeal of the Department.