2016 (8) TMI 1054 - AT - Service Tax

Taxability of collection of development fee from the passengers operational, management and development of airport - section 65(3c) of Finance Act, 1994 definition of taxable service - section 65(105)(zzm) of Finance Act, 1994 fundamental requirement of the demand of tax - Held that - 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 development fee is not for any specific service rendered by them, but is a flat rate of charge to passengers, it cannot be said that the amount so collected is by way of service charge. Further, 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 appeal disposed off appellant not required to pay tax on development fee decided in favor of appellant.

Issues Involved:
1. Taxability of 'development fee' collected by Mumbai International Airport Pvt Ltd.
2. Authority to levy tax and the manner of its implementation.
3. Interpretation of statutory provisions under the Airport Authority of India Act, 1994 and Finance Act, 1994.
4. Compliance with remand directions from the Tribunal.
5. Nexus between 'development fee' and consideration for taxable service.
6. Applicability of penalties under sections 76, 77, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Taxability of 'Development Fee':
The primary issue was whether the 'development fee' collected by Mumbai International Airport Pvt Ltd from passengers constituted a taxable service under section 65(105)(zzm) of the Finance Act, 1994. The Tribunal noted that the 'development fee' was intended for future development and not for any immediate service rendered to passengers. The Supreme Court's decision in Consumer Online Foundation v. Union of India [(2011) 5 SCC 360] was cited to argue that such levies are in the nature of cess or tax and not a consideration for services rendered.

2. Authority to Levy Tax and Manner of Implementation:
The Tribunal criticized the adjudicating authority for failing to articulate the legal authority to levy the tax and the manner in which the transaction conformed to the charging provision of the taxing statute. The adjudicating authority was found to have dismissed the Tribunal's remand directions casually, without providing a clear legal basis for the tax demand.

3. Interpretation of Statutory Provisions:
The Tribunal examined sections 22 and 22A of the Airport Authority of India Act, 1994. Section 22 allows the airport authority to charge users for facilities, while section 22A permits the collection of a 'development fee' without the passengers' consent, specifically for future development. The Tribunal concluded that the 'development fee' under section 22A is distinct from charges under section 22 and does not constitute a consideration for services rendered.

4. Compliance with Remand Directions:
The Tribunal found that the adjudicating authority did not comply with the remand directions, which required an analysis of whether the 'development fee' constituted a taxable consideration for services. Instead, the authority merely discussed the cited judgments without addressing the core issue.

5. Nexus Between 'Development Fee' and Taxable Service:
The Tribunal emphasized that for a service to be taxable, it must be rendered to a person by a specifically described service provider within an airport. It was noted that passengers did not receive any additional benefits for the 'development fee' and that the fee was not linked to any specific service provided by the airport.

6. Applicability of Penalties:
Penalties under sections 76, 77, and 78 of the Finance Act, 1994 were imposed by the adjudicating authority. However, given the Tribunal's conclusion that the 'development fee' did not constitute a taxable service, these penalties were deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned order, concluding that the 'development fee' collected by Mumbai International Airport Pvt Ltd is not a consideration for services rendered and, therefore, not liable to service tax. The appeals were disposed of with consequential relief.

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