By TIOL News Service

MUMBAI, AUG 18, 2016: THE  appellants are responsible for managing the entire operations of CSI Airport at Mumbai. Apart from other charges, the applicant charges development fee @ Rs.100/- from the departing domestic passenger and Rs.600/- from the passenger travelling abroad. The fee charged by the applicants is for the development of the airport  in future.  

As the development fee charged by the applicants is in nature of service to be provided, therefore, the Revenue was of the view that on these development fees, the applicant is required to pay service tax under the category of "Airport services".

Various SCNs were issued for the period April 2009 to February 2013 to the applicant demanding service tax and they were all confirmed along with interest and penalties by the  CST, Mumbai. Incidentally, the first SCN for the period April 2009 and January 2011 traveled up to the CESTAT and when it was remanded to the adjudicating authority for a fresh decision. This SCN too is adjudicated under the impugned order. The total demand amount runs into hundreds of crores.

While waiving the requirement of pre-deposit of the adjudged dues, the CESTAT observed –

"7. Levy of development fee has been struck down by the Hon'ble Supreme Court holding that the applicant is not entitled to collect the development fee from the passengers through airlines in the case of Consumer Online Foundation ( (2011) 5 SCC 360 ). Therefore, it is not a service and the same view has been taken by this Tribunal in the case of Cochin International Airport Ltd. (supra) which has been affirmed by the Hon'ble Kerala High Court. Further, as argued by the learned Spl. Counsel that intention of the parties has to be seen as they have collected the development fee as service to be provided in future. We have seen the intention of the parties and gone through the records placed before us. On the basis of the records, we find that from May 2012 onwards the applicants have charged tax on these development fees from the airlines and whatever service tax collected by them has been paid to the department."

We reported this order as - 2014-TIOL-2431-CESTAT-MUM.

The appeal was heard recently.

Incidentally, insofar as the proceedings pertaining to the remanded case is concerned, the Member (Technical) had some scathing comments reserved for the adjudicating authority.

In his words -

"…the adjudicating authority has overlooked the fundamental requirement of a demand for tax; articulation of the authority to levy that tax and the manner in which the impugned transaction conforms to the charging provision of the taxing statute. While the impugned ordered is long on criticism of wisdom of Tribunal in highlighting the cited decisions in the remand order, it is woefully deficient in enunciating the legal authority as envisaged in section 73 of Finance Act, 1994 to conclude that there has been short-recovery or non-recovery. Indeed, on occasion, we find that the adjudicating authority, instead of abiding by the direction of the superior appellate authority, appears to have proceeded on the assumption that he is a contributor to a law journal of review. He has specifically stated that the logic and allusions in the remand order do not convince him. We would appreciate it if the Chairman, Central Board of Excise and Customs were to direct the Zonal Members to accord some attention to the discharge of adjudication function by Commissioner in their respective jurisdiction. In our view, tax collection is normally routine but recovery of unpaid taxes dealing, as it does with alleged non-payees, requires significant attention if the credibility of the tax administration system is to be sustained. Such casual dismissal in an adjudication order does add a whit to the reputation of the system."

Be that as it may, as regards the issue per se , the Bench reproduced section 65(105)(zzm) of the FA, 1994 and after extracting the decision of the Kerala High Court in Cochin International Airport Ltd. - 2009-TIOL-710-HC-KERALA-ST wherein it is held that the 'development fee' is not linked to provision of service and hence not liable to service taxconcluded that the impugned order is not sustainable in law; therefore set aside the same with consequential relief.

The appeals were disposed of.

(See 2016-TIOL-2103-CESTAT-MUM )