OVERVIEW OF THE CASE
|Case name||Central GST Delhi III V. Delhi International Airport Ltd.|
|Citation||(2023) 05 SC CK 0070|
|Civil Appeal No.||8996 Of 2019, 2465 Of 2020, 4751-4753 Of 2021|
|Date of Judgment||19-05-2023|
|Appellant||Central GST Delhi III|
|Respondent||Delhi International Airport|
|Bench||Division Bench S.Ravindra Bhatt,J ; Dipankar Datta,J|
|Statutes referred||Airport Authority Act 1994, Section-22A,22B,22C Aircraft rules,1937 Finance Act,1994 Rajasthan Agricultural Produce Markets Act,1961 Section 9|
The decision of the supreme court in the case Delhi central GST III v. Delhi international Airport pertains to the service tax levy on user development fees as collected by the airport operation entities. This significant case examines the validity of the levy of development fees and their collection from the customer (passengers) by the airport authorities as well as by the lessees, in any case. The case analyses several provisions of the Airport Authority Act (along with its amendment) in special reference to section 22 and the clauses (A)(B) and (C) of the said section. In accordance to section 22A it was held by the court that the amounts collected through development fees are not subjected to services tax as there exists no nexus between the amounts charged and the services rendered.
Revenue department-tax-service tax- cess-airport regulation-airport authority act 1994-Supreme court of India-Finance Act 1994- Airport Regulation and revenue-
- Appelant- central GST Delhi –III
- Respondent- Delhi International Airport
(Collectively by The Mumbai International airport, The Hyderabad international airport and The Delhi international Airport referred to as ‘assesses’)
Joint agreement between Delhi international airport and airport authority India (AAI). AAI is the corporate body created by Airport authority India act
- In order to carry out developmental activities, del. Int. airport authorized by central govt. to collect ‘development fee’ amounting to Rs.100 for every domestic passenger and Rs. 600 for international passenger, with support of section 22A, AAI Act 1994. This time frame set for the collection was 48 months.
- Commissioner of service tax has issued several show cause notices to the respondent to carry out payments of service tax on the ‘development fee’ collected from the customers.
- The show cause notices were adjudged by confirming demands following which, Penalties were levied upon the respondent by the appellant-the Revenue dept. on the respondent.
- An appeal has been filed by the respondent before ‘The Customs Excise & service Tax appellate Tribunal’ (CBEC). The decision of the tribunal went in favor of the respondent and it was held that the development fee collected is not subjected to service tax levy.
Whether the concerned airport is liable to pay service tax from the amount collected as developmental fee.
Whether user development fee collected is taxable under service tax
The appellants, The Revenue Dept: The appellants in their contention argued that the airport is liable to render tax as per the provisions of The Finance act,1994. Further contentions raised by the counsel for the dept. of revenue are that the concerned airport is function as licensees, licensed by the AAI. The collection of “passenger service fees” and “user development fees” (UDF) are prescribed under Rule 88 and 89 of Aircraft Rules,1937. The counsel sought to draw distinction between UDF, Passenger services fee and Development fee, the distinction being specified by CBEC. Since, the amounts collected under UDF are to enhance passenger services and aid in the development and augmentation of the facilities at the airport and thus, charges collected for rendering service. It was asserted that “Development fees” are not subject to tax because such is effected upon approval of the central govt. and is meant for the expansion, and subsequent development of the airport. But the wording of section 22A of the AAI Act,1994 gives the idea that the aim of UDF is to better apt the airports to provide upgraded amenities to the passengers and is collection meant for services rendered.
Reference was made to the decision of the Hon’ble Supreme Court’s decision in ‘Consumer Online Foundation v. Union of India 2011 (5) SCR 911 to affirm that the imposition and collection of UDF was ultra vires the AAI Act. And it was also found by the counsel that it was held disputed as to whether DF was a tax and this fact was used by the counsel to disapprove DF as tax.
Further the case of Krishi Upaj Mandi v commissioner of central Excise 2022(1) SCR 700 was relied on to assert that UDF, by its nature is similar to market committees and are liable to levy if services are provided in return.
The respondents, The Delhi International airport. (Referred to as “assesses”:
Senior counsels standing on behalf of the assesses- Mr. Tarun Gulati, Mr. Pritish Kapoor, Mr. Arvind Datar have relied on the earlier decision of the supreme court in Consumer Online foundation v. union of India to substantiate their claim that UDF is a tax and therefore has no basis of consideration(as defined in section 2-d , Indian contract Act,1872).The court held in this case that “development fee” as charged is in it’s true nature a cess or a tax and is meant to be utilized for purposes pertaining to a narrow spectrum. They argued that the contractual relationship between the passengers and the airline provides a passenger access to airport and there are no express terms which assert the payment of any amount by the passengers to avail the amenities of the airport. Therefore, the services rendered at the airport do not cease to exist following the dissolution of the “Development Fee”. The counsels further distinguished between the disputed sections of the AAI Act- section 22 and 22A asserting that the levy/tax as under section 22A is a compulsory imposition on all passengers and is devoid of any payment in consideration of any services rendered.
The case of Krishi Upaj Mandi samaj Samiti (supra), as was referred to by the counsel of the appellants was analyzed by counsel. And they counter-argued to draw a distinction between the charge levied under Section 9(2), Rajasthan Agricultural produce markets Act,1961 and the disputed charges under section 22A, AAI Act as the former pertains to rental charges and the later pertains to a compulsory tax.
The court assessed the history and legislations concerning airport regulation. The court upheld the distinction between section 22A and section 22 and the different nature of charges imposed under both. The court further drew analysis from section 12, AAI Act inserted in 2003, by way of amendment. The said section empowers the lessee, assigned to carry out and render the various facilities provided to the passengers to impose charges on the parties it renders its services to. The basis for such charges is placed upon the contracts formed between the airport authority or the lessee as in any case and the party availing the services. However, it was also held that the contractual relation between the customer and the airport authority is just limited to services rendered and no further to other objectives of up gradation, development or expansion of the airport, regarded to be funded by development fees as provided under section 22A.Clauses (B) and (C) of the same section pertain to the establishment of a new airport and a private airport in lieu of existing airports.
Thus it was held that the taxes obtained through the said act merely aid in generation of revenue for purposes mention in sections 22A,22B,22C and are in true nature, taxes. The court insisted on the principle that any tax levied by the government must be in accordance to the provisions of law and the motive must be accurately construed. Section 67,Finance Act has been cited by the court to provide that in order to bring an amount under the ambit of taxation, there has to be an established nexus between the amount charged from customers and the services rendered.
The conclusions drawn by the court therefore stand to be
- As already found by the court in Online foundation case(supra), UDF is a levy of statutory nature.
- No services have been rendered by the airport authority in consideration to the charges.
- The channelization and utilization of the said charges are monitored as per provisions of law.
This brings the court to determination that the orders of the CBEC stands valid and thus cannot be set aside. And thus, the appeals of the revenue department stand dismissed.
- ‘1288_2018_12_1501_33629_Judgement_23-Feb-2022.Pdf’ <https://main.sci.gov.in/supremecourt/2018/1288/1288_2018_12_1501_33629_Judgement_23-Feb-2022.pdf
- ‘Airports Authority of India Act, 1994’ <http://indiacode.nic.in/handle/123456789/1979
- ‘AIRPORTS AUTHORITY OF INDIA (AMENDMENT) ACT 2003’ <http://www.commonlii.org/in/legis/cen/num_act/aaoia2003388/
- ‘Central GST Delhi-III vs Delhi International Airport Lt’ <https://www.courtkutchehry.com/Judgement/Search/t/2369066-central-gst-delhi-iii-vs-delhi>
- ‘Consumer Online Foundtion vs Union Of India & Ors on 26 April, 2011’ <https://indiankanoon.org/doc/1390087/
- ‘Home | Directorate General of Civil Aviation | Government of India’ <https://www.dgca.gov.in/digigov-portal/?dynamicPage=aircraftRules1937/1/0/viewDynamicRulesReq>
- ‘Krishi Upaj Mandi Samiti New Mandi … vs Commissioner Of Central Excise … on 23 February, 2022’ <https://indiankanoon.org/doc/68798859/
- ‘Rajasthan Agricultural Produce Markets Act, 1961’ <https://www.indianemployees.com/acts-rules/details/rajasthan-agricultural-produce-markets-act-1961
 ‘Central GST Delhi-III vs Delhi International Airport Lt’ <https://www.courtkutchehry.com/Judgement/Search/t/2369066-central-gst-delhi-iii-vs-delhi> accessed 4 November 2023.
 ‘Home | Directorate General of Civil Aviation | Government of India’ <https://www.dgca.gov.in/digigov-portal/?dynamicPage=aircraftRules1937/1/0/viewDynamicRulesReq>.
 ‘Airports Authority of India Act, 1994’ <http://indiacode.nic.in/handle/123456789/1979>3.
 ‘Consumer Online Foundation vs Union of India & Ors on 26 April, 2011’ <https://indiankanoon.org/doc/1390087/>
 ‘1288_2018_12_1501_33629_Judgement_23-Feb-2022.Pdf’ <https://main.sci.gov.in/supremecourt/2018/1288/1288_2018_12_1501_33629_Judgement_23-Feb-2022.pdf>
 ‘Krishi Upaj Mandi Samiti New Mandi … vs Commissioner of Central Excise … on 23 February, 2022’ <https://indiankanoon.org/doc/68798859/> accessed 4 November 2023.
 ‘Rajasthan Agricultural Produce Markets Act, 1961’ <https://www.indianemployees.com/acts-rules/details/rajasthan-agricultural-produce-markets-act-1961> accessed 4 November 2023.
 ‘AIRPORTS AUTHORITY OF INDIA (AMENDMENT) ACT 2003’ <http://www.commonlii.org/in/legis/cen/num_act/aaoia2003388/> accessed 4 November 2023.
This article is written by Insha Pani, National Law University Odisha, an intern at Legal Vidhiya