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TMI Blog2018 (11) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... nterim Order No. 68/2018 - Dated:- 2-11-2018 - Mr. M.V. RAVINDRAN, MEMBER (JUDICIAL) And Mr. P. VENKATA SUBBA RAO, MEMBER (TECHNICAL) Shri G. Shivadass, Advocate for the Appellant. Shri Arun Kumar, Deputy Commissioner (AR) for the Respondent. ORDER Per: M.V. Ravindran This appeal is directed against Order-in-Original No. 44/2009 ST dated 28.10.2009. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 8. In view of the facts and circumstances of this case and the judicial pronouncement on the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... User Development Fee Rule 88 of the Aircraft Rules, 1937 framed under the Aircraft Act, 1934 Not defined in the Rules or in the parent Act. The concession agreement defines it. Leviability of Service tax is the issue in the present case. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enger 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: 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 @ ₹ 100/- per departing domestic passenger and ₹ 600/- per departi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nger 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 travel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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. 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 ₹ 1000/- per passenger. In continuation, the GOI sent another letter dated 19 March 2008 clarifying that the UDF shall be inclusive of applicable taxes, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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