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Central GST, Delhi vs. Delhi International Airport Ltd - (Supreme Court) (19 May 2023)

User development fee is a statutory levy and not subjected to levy of service tax


Goods and Services Tax

In present appeals, orders of the Customs, Excise and Service Tax Appellate Tribunal (“CESTAT”) are impugned by the service tax authorities (“the revenue”), who argue that, user development fee levied and collected by the airport operation, maintenance and development entities (i.e., the Mumbai International Airport Pvt. Ltd., the Delhi International Airport Pvt. Ltd., and the Hyderabad International Airport Pvt. Ltd., (“the assessees”) is subjected to service tax levy, under the provisions of the Finance Act, 1994.

In the present case, neither is there any compulsion to levy development fee nor is the collection conditional upon its deposit in the government treasury. However, the absence of these features in present Court’s opinion, does not render UDF any less a statutory levy. Firstly, the ruling in Consumer Online Foundation v. Union of India (UOI) and Ors. is conclusive that UDF is a statutory levy. Secondly, the collection is not premised on rendering of any service. Thirdly, the amounts collected are deposited in an escrow account, not within the control of the assesses. Fourthly, the utilization of funds, is monitored and regulated by law.

The fact that the amount is not deposited in a government treasury, per se, does not make it any less a statutory levy or compulsory exaction. Nor does its discretionary nature render it any less a statutory levy. Airport management has evolved; it is no longer the monopoly of the government; private participation is recognized. This sector is now regulated through a new regulator, i.e., the Airports Economic Regulatory Authority of India.

As part of the Union’s economic policies, the upgradation and renovation of airports are funded through UDF, which is a statutory levy. Instead of the conventional practise of ensuring that amounts collected are deposited with the Government, an entirely new regulatory regime has been envisioned, under the Airports Authority Of India (major Airports) Development Fees Rules, 2011 (2011 Rules), read with specific conditions imposed by the AAI on each assessee, which includes monitoring of amounts, nature of expenditure, submission of plans for expansion, renovation, their sanctioning etc. These rules and controls are in the public interest, and evidently intended to further efficiency in funding and swift taking up and completion of works, rather than funding through Finance Rules, which might entail delay, and cost overruns. However, the public nature of these funds does not in any manner get undermined, merely because they are kept in an escrow account, and their utilization is monitored separately. The impugned orders cannot be faulted. Appeals dismissed.


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