CENTRAL GST DELHI - IIIversusDELHI INTERNATIONAL AIRPORT LTD

322                      [2023]REPORTS
               SUPREME COURT    7 S.C.R. 322              [2023] 7 S.C.R.


A                        CENTRAL GST DELHI - III
                                       v.
                  DELHI INTERNATIONAL AIRPORT LTD
                        (Civil Appeal No. 8996 of 2019)
B                                MAY 19, 2023
          [S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
            Airports Authority of India Act, 1994: ss. 22, 22A – Finance
      Act, 1994 – ss. 67 and 68 (1) –User development fee-UDF, levied
      and collected u/s. 22A by the airport operation, maintenance and
C
      development entities-Mumbai International Airport Pvt. Ltd., Delhi
      International Airport Pvt. Ltd., and Hyderabad International Airport
      Pvt. Ltd., from the domestic/international passengers departing the
      airport – Levy of service tax – Held: User development fee levied
      and collected by the airport entities is a statutory levy, thus, not
D     subject to service tax levy under the provisions of the Finance Act –
      UDF collected by the assessee is to bridge the funding gap of project
      cost for the development of future establishment at the airports –
      There is nothing on record to show that any additional benefit has
      accrued to passengers, visitors, traders, airlines etc., upon levy of
      UDF during the said period – As part of the Union’s economic
E
      policies, the upgradation and renovation of airports are funded
      through UDF, which is a statutory levy – Airports Economic
      Regulatory Authority of India Act, 2008 – s. 13 – Aircraft Rules,
      1937 – r. 88, 89.
            Dismissing the appeals, the Court
F
            HELD: 1.1 The nature of development fee, collected under
      Section 22A of the Airports Authority of India Act, 1994 is that of
      statutory exactions and not fees or tariffs. [Para 29][339-H]
            1.2 To attract service tax levy, a taxable service has to be
G     provided to a recipient, by a service provider, for a consideration
      and in the absence of any nexus to any service rendered, an amount
      charged, or value of service or goods provided without a
      consideration would not be a taxing incident. [Para 32][341-E]


H
                                      322
    CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                        323
                   AIRPORT LTD

      1.3 Besides the Airports Authority of India (Major Airports)        A
Development Fees Rules 2011, the assessee, in the case of
DIAL, has placed on the record, a letter issued to it, by AAI
which imposes controls on the utilization of amounts collected as
development fee; apart from the fact that the amounts are
deposited in an escrow, any plan for utilization has to be approved.
                                                                          B
Unlike fees, rent, charges etc., provided under Section 22 of AAI
Act, assessee companies are authorized on behalf of the AAI to
levy and collect ‘development fee’ under Section 22A of the AAI
Act on behalf of the AAI and was applied for generating revenue
for utilization of the same for the specific purpose provided under
sub- clause (a), (b) and (c) of section 22(A) of the AAI Act. The         C
UDF collected by the assessee is to bridge the funding gap of
project cost for the development of future establishment at the
airports. There is nothing on record to show that any additional
benefit has accrued to passengers, visitors, traders, airlines etc.
upon levy of UDF during the period in question in the present
                                                                          D
case. [Para 34][342-C-F]
       1.4 There is a distinction between the charges, fee and rent
etc. collected under Section 22 of the AAI Act and the UDF levied
and collected under Section 22A of the AAI Act. It is that the
UDF is in the form of ‘tax or cess’ collected for financing the cost
of future projects and there was no consideration for services            E
provided by the assessee to the customer, visitors, passengers,
vendors etc. The aggregate of collections in the bank accounts
do not form part of profit and loss account. [Para 35][342-F-G]
       1.5 It is also useful to notice that by a circular issued by the
CBEC, Circular No. 89/7/2006- ST dated 18.12.2006, it was                 F
clarified that collection of amounts, by way of taxes, sovereign or
statutory dues, would not be subjected to service tax levy. [Para
36][342-G; 343-A]
      1.6 In the instant case, undoubtedly neither is there any
compulsion to levy development fee, nor is the collection                 G
conditional upon its deposit in the government treasury. However,
the absence of these features does not render User Development
fee(UDF) any less a statutory levy. Firstly, the ruling in Consumer

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324           SUPREME COURT REPORTS                      [2023] 7 S.C.R.


A     Online Foundation’s case 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
      amount, not within the control of the assesses. Fourthly, the
      utilization of funds, is monitored and regulated by law. In this
      regard, the fact that the amount is not deposited in a government
B
      treasury, per se, does not make it any less a statutory levy or
      compulsory extraction. 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. As part of the Union’s economic
C     policies, the upgradation and renovation of airports is 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 2011 Rules, read with specific conditions
      imposed by the Airport Authority India on each assessee, which
D
      includes monitoring of amounts, nature of expenditure,
      submission of plans for expansion, renovation, their sanctioning
      etc. These rules and controls are in public interest, and evidently
      intended to further efficiency in funding and swift taking up and
      completion of works, rather than funding through Finance Rules,
E     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. Thus, the impugned order
      cannot be faulted. [Paras 39, 40][345-B-H; 346-A]
F           Consumer Online Foundation v Union of India 2011
            (5) SCR 911; Commissioner of Service Tax vs. Bhayana
            Builders (P) Ltd. 2018 (1) SCR 1128 – relied on.
            Krishi Upaj Mandi Samiti v Commissioner of Central
            Excise 2022 (1) SCR 700 – referred to.
G                           Case Law Reference
      2011 (5) SCR 911             relied on           Para 27, 28, 29
      2018 (1) SCR 1128            relied on           Para 32
      2022 (1) SCR 700             referred to         Para 37
H
    CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                                 325
                   AIRPORT LTD

      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8996                          A
of 2019.
      From the Judgment and Order dated 18.01.2019 of the Custom
Excise Service Tax Appellate Tribunal, New Delhi in AN No. 52815 of
2016.
       With                                                                        B

       Civil Appeal Nos. 2465 of 2020 and 4751-4753 of 2021.
       Sanjay Jain, A.S.G., B. Krishna Prasad, Mukesh Kumar Maroria,
Ms. Nisha Bagchi, Arkaj Kumar, Padmesh Mishra, Digvijay Dam, Advs.
for the Appellant.                                                                 C
      Arvind Datar, Preetesh Kapur, Tarun Gulati, Sr. Advs., Mrs. Vanita
Bhargava, Ajay Bhargava, Shantanu Chaturvedi, Ms. Prerna Singh, M/
s. Khaitan & Co., Mahesh Agarwal, Kishore Kunal, Shubham
Kulshreshtha, Ms. Runjhun Pare, Kaustubh Singh, E. C. Agrawala, Ms.
Richa Kapoor, Kunal Anand, Ms. Tusharika Sharma, Kunal Kishore,                    D
Advs. for the Respondent.
       The Judgment of the Court was delivered by
       S. RAVINDRA BHAT, J.
       1. In all these appeals, orders of the Customs, Excise and Service
Tax Appellate Tribunal1 (hereafter “CESTAT”) are impugned by the                   E
service tax authorities (hereafter “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., (hereafter collectively called          F
“the assessees”) is subjected to service tax levy, under the provisions of
the Finance Act, 1994 (hereafter “the Act”).
      2. All the assessees had entered into joint venture arrangements/
agreements (hereafter “OMDA”) with the Airports Authority of India
(hereafter “AAI”, a body corporate created bythe Airports Authority of             G
India Act, 1994 [hereafter “AAI Act”]. Under OMDA, the assesses

1
 Final Order No, ST/A/50064/2019-CUIDBI dated18/01/2019 [by the Principal Bench,
CESTAT, New Delhi]; Final Order No. A/88830- -88832/16/STB dated 28.01.2016 [by
the Western Zonal Bench, CESTAT, Mumbai]; and Final Order No. A/30739/2019
dated 16.09.2019 [by the CESTAT Regional Bench at Hyderabad].                      H
326              SUPREME COURT REPORTS                          [2023] 7 S.C.R.


A     agreed to undertake some activities enjoined upon the AAI, by the AAI
      Act. The assessees were authorised, by various notifications (dated 27th
      February 2009) issued by the Central Government under Section 22A of
      the AAI Actto collect a “development fee” @ Rs. 100/- for every
      departing domestic passenger and Rs. 600/- for every departing
      international passenger at the concerned airports for a period of 48 months.
B
            3. The Commissioner of Service Tax, through various show cause
      notices demanded payment of tax on the development fee collected for
      various periods. These notices were adjudicated and confirmed; the
      CESTAT remanded the matter to the original authority requiring fresh
      adjudication after taking into consideration the decisions of this court
C     in Consumer Online Foundation v. Union of India2, Commissioner
      of Central Excise v. Cochin International Airport Ltd., 3 Acer
      India Ltd. and Orissa Cement Ltd. v. State of Orissa4 and various
      instructions issued by the Central Board of Excise and Customs
      (hereafter “CBEC”). The original authority disposed of all show cause
D     notices by confirming demands, and also levying penalties under the
      Act. The adjudicating authority accorded the benefit of “cum-tax”
      valuation. These orders were challenged before the CESTAT, which, by
      the orders impugned, allowed the assessees’ appeals, holding that the
      development fee collected was not liable to service tax levy.
E                                          II
             The relevant provisions
             4. Section 65 (105)(zzm) of the Finance Act, 1994, contains the
      definition of “airport service” (with effect from 01.07.2010) and states
      that such service is:
F
                 “any service provided or to be provided by airports
                 authority or by any other person in any airport or a civil
                 enclave”
             Before the amendment, i.e., before 1 July 2010, the definition, of
      airport service was as follows:
G
                 “to any person, by airports authority or any person
                 authorised by it, in an airport or a civil enclave”
      2
        (2011) 5 SCC 360
      3
        2010 (17) STR J 79 (S.C.)
      4
H       1991 Supp (1) SCC 430
    CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                            327
         AIRPORT LTD [S. RAVINDRA BHAT, J.]

      Section 65 (3d) defines airport authority as:                           A
          “Airports Authority of India constituted under section 3
          of the Airports Authority of India Act, 1994 (55 of 1994)
          and also includes any person having the charge of
          management of an airport or civil enclave”.
       5. Section 68 (1) of the Finance Act provides that every person        B
providing taxable service to any person shall pay service tax at the rate
specified in section 66. Section 67 (1) of the Finance Act, provides that
where service tax is chargeable on any taxable service with reference
to its value then such value shall be the gross amount charged by the
service provider for such service provided or to be provided by him.          C
      6. The relevant provisions of the Airports Economic Regulatory
Authority of India Act, 2008 and the Aircraft Rules, 1937 are extracted
below:
      Section 13 of the Airports Economic Regulatory Authority of India
Act, 2008 sets out the functions of the authority, and inter alia, reads as   D
follows:
          “13. Functions of Authority.
          (1) The Authority shall perform the following functions in
          respect of major airports, namely:—
                                                                              E
          (a) to determine the tariff for the aeronautical services
          taking into consideration—
          ****************
          (b) to determine the amount of the development fees in
          respect of major airports;                                          F

          (c) to determine the amount of the passengers service fee
          levied under rule 88 of the Aircraft Rules, 1937 made under
          the Aircraft Act, 1934 (22 of 1934);…”
      Provisions of the Aircraft Rules, 1937:                                 G
          “Rule 88. Passenger Service Fee. —The licensee is entitled
          to collect fees to be called as Passenger Service Fee from
          the embarking passengers at such rate as the Central
          Government may specify and is also liable to pay for
          security component to any security agency designated by
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328     SUPREME COURT REPORTS                          [2023] 7 S.C.R.


A        the Central Government for providing the security service.
         Provided that in respect of a major airport such rate shall
         be as determined under clause (c) of sub-section (1) of
         section 13 of the Airports Economic Regulatory Authority
         of India Act, 2008.
B        Rule 89. User Development Fee —The licensee may, -
         (i) levy and collect at a major airport the User Development
         Fee at such rate as may be determined under clause (b) of
         sub-section (1) of section 13 of the Airports Economic
         Regulatory Authority of India Act, 2008;
C        (ii) levy and collect at any other airport the User
         Development Fees at such rate as the Central Government
         may specify.”
      The relevant provisions of the AAI Act are extracted below:

D        “Section 22. The Authority may,-
         (i) With the previous approval of the Central Government,
         charge fees, or rent-
         (a) for the landing, housing or parking of aircraft or for
         any other service or facility offered in connection with
E        aircraft operations at any airport, heliport or airstrip
         Explanation. -
         In this sub-clause “aircraft” does not include an aircraft
         belonging to any armed force of the Union and “aircraft
         operations” does not include operations of any aircraft
F        belonging to the said force;
         (b) for providing air traffic services, ground safety services,
         aeronautical communications and navigational aids and
         meteorological services at any airports and at any
         aeronautical communication station;
G
         (c) for the amenities given to the passengers and visitors
         at any airport, civil enclave, heliport or airstrip;
         (d) for the use and employment by persons of facilities
         and other services provided by the authority at any airport,
         civil enclave heliport or airstrip;
H
    CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                               329
         AIRPORT LTD [S. RAVINDRA BHAT, J.]

          (ii) with due regard to the instructions that the Central              A
          Government may give to the authority, from time to time,
          charge fees or rent from persons who are given by the
          authority any facility for carrying on any trade or business
          at any airport, heliport or airstrip.
          Section 22A. The Authority may, after the previous                     B
          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-                                           C

          (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              D
          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 lieu of the airport referred to in clause         E
          (a) or advancement of loans to such companies or other
          persons engaged in such activities.”
                                     III
       Contentions of the parties
                                                                                 F
       7. Ms. Nisha Bagchi, learned counsel for the revenue, submits
that assessees function as licensees of Airports. The airports are capable
of being licensed by the AAI to operate as aerodromes. It was submitted
that grant of licenses is subject to express conditions. Rule 88 provides
for collection of fees known as “passenger services fees” from the
embarking passengers; Rule 89 provides for collection of “User                   G
Development Fee” (hereafter “UDF”) by licensees. Ms Bagchi argued
that user development fees are nothing but amounts collected for
extending or enhancing various services like providing passenger lounges,
passenger amenities, toilets, rest rooms and other facilities inside airports.
Even the agreement entered by the assessees with AAI, indicates
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330             SUPREME COURT REPORTS                            [2023] 7 S.C.R.


A     thatUDFisto enhance passenger amenities, services and facilities. Those
      amounts areto be used for development, management, maintenance and
      operation and expansion of facilities at the airport.
             8. It was urged that the nature of UDF indicates that such fees
      are amounts collected for rendering various services. The amounts
B     collected is nothing but development fee, meant to be used for funding
      and financing specific renovation, maintenance, development and
      upgradation of airports. These are necessary due to cost escalation.
      These amounts are for services rendered, and providing access by the
      airport. Such amounts are taxable. Learned counsel also relied on the
C     circular No. 106/Commr(ST)/2009 dated 08.07.2011, which specifically
      stated that service tax is paid by the various airports on passenger services
      fee and UDF but no tax is paid on development fees. It was argued that
      CBEC has clarified that passenger service fee, user development fee
      and development fee are different and development fee is to be taxed
      under “airport services”.
D
             9. Learned counsel sought to distinguish the decision of the Kerala
      High Court in the case of Cochin International Airport Ltd. because in
      that case, what was in issue was user fee while in the case in hand it is
      UDF. Counsel reiterated thatthe findings of the lower authorities are
      correct and submits that the impugned orders of CESTAT call for
E     interference.
             10. Learned counsel pointed out that by Section 22A of the AAI
      Act, the authority “may”, after the previous approval of the Central
      Government “levy on, and collect from, the embarking passengers
      at, an airport, the Development Fees”. It was contended that such
F     levy cannot be called a tax because it is discretionary and subject to the
      approval of the Central Government, meant for funding or financing the
      costs of upgradation, expansion or development of the airport at which
      the fee is collected; or establishment or development of a new airport in
      lieu of the existing airport or towards investment in the equity in respect
G     of “shares to be subscribed by the authority in companies engaged
      in establishing, owning, developing, operating or maintaining a
      private airport in lieu of the airport” or “advancement of loans to
      such companies or other persons engaged in such activities.” It
      was also urged that the amounts cannot be termed as levy, because they
      are not deposited with the government treasury.
H
       CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                            331
            AIRPORT LTD [S. RAVINDRA BHAT, J.]

        11. It was submitted that from a reading of Section 22A, it is clear     A
that it allows for funding or financing the cost of upgradation, expansion
or development of the airport at which the fee is collected and
establishment or development of a new Airport in lieu of the airport at
which the fee is collected. This is apre-funding collection and imposed
for the facility to be provided by the assessees and tobe used for funding
                                                                                 B
of project cost which ultimately would result in creation of better facilities
and amenities for passengers. The assessees entered into agreements
for the purpose of its operation, management and development of airports
(OMDA). In terms of such OMDAs, assessees are responsible for the
development, design, upgradation of airport. It is for this purpose that
they have been permitted to collect UDF from the passengers.                     C
        12. It is further submitted that the assessees are authorized to
collect UDF by the Ministry of Civil Aviation which granted approval
under Section 22A of the AAI Act. Once it is clear that the purpose and
object of the UDF is for funding or financing the costs of upgradation,
expansion or development of the major Airports, only the rate of fees            D
are determined by the Airport Economic Regulatory Authority. The
upgradation or development of an airport results in better infrastructure
and services to passengers. Collection of the DF could facilitate and
provide better services to the passengers who would be the recipient of
the airport service. Therefore, the amount cannot be called a tax or levy,
but is actually a collection for service, and consequently liable to service     E
tax.
       13. The revenue argues that the definition of airport service is
wide and includes any service provided or to be provided by any person
in the airport. It is a taxable service. Further, without payment of such
levy, passengers cannot enter the airport nor can have access to the             F
plane. Thus, the UDF collected by DIAL is covered by the definition of
“airport service” and would be liable to payment of service tax. The
impugned order has failed to appreciate this submission and hence, the
same is liable to be set aside.
       14. It was argued that the decision of this court in the case of          G
Consumer Online Foundation v Union of India5 had expressed the
view that DF appeared to be in the form of tax or cess, but wasnot a
legally collected tax. It was argued that Section 22 Aprovided for the

5
    2011 (5) SCR 911                                                             H
332               SUPREME COURT REPORTS                        [2023] 7 S.C.R.


A     “levy” of DF, but the rate at which the said levy was to be collected had
      not been prescribed by framing of a separate rule by the Airports
      Economic Regulatory Authority (AERA) as amended by the 2008 Act.
      This court held that the collection of UDF by the assessees prior to the
      notification issued by AERA was considered to be levied and collected
      without the authority of law. It further found that the levy and collection
B
      of UDF by the two airport concessionairesat the rates fixed by the Central
      Government (by two letters dated 9.2.2009 and 27.2.2009) respectively
      were ultra vires the AAI Act, and were not saved by Section 6 of the
      General Clauses Act, 1897.
             15. It is submitted that in the above decision, there is no clear
C     finding that DF is a tax or cess and the same was held tobe ultra vires
      the AAI Act on the ground that the rate could not have been fixed by the
      Central Government, but only by making a rule by AERA which has
      notbeen done. In the present case, we are concerned with the levy of
      service taxon DF collected by the respondents from the passengers.
D     Also in that decision, this court was not concerned with levy or otherwise
      of service tax on DF. It was argued that DF has not been collected as
      tax orcess and therefore, the contention that DF is a tax on which there
      cannot be any service tax is incorrect. The nature of DF is that these
      are the charges collected by the respondents for development of facilities
      for the use ofthe airport. In fact, the assesses’ contention was these are
E     the charges for the use of the airport services by the passengers and is
      not a tax.
             16. Learned counsel relied on the judgment reported as Krishi
      Upaj Mandi Samiti v Commissioner of Central Excise6 and urged
      that the nature of UDF is similar to the optional collection made by
F     market committees who perform services, which are not in the nature
      of a statutory activity or a sovereign function, and if such services are
      rendered for a consideration, they are subjected to levy.
             17. Mr. Arvind Datar, Mr. Tarun Gulati and Mr. Pritesh Kapoor,
      learned senior counsel appearing for the assessees, contended that the
G     decision in Consumer Online (supra) has concluded the nature of
      collections; it is a tax, unrelated to any service provided, and has to be
      borne in mind that there is no consideration. Learned counsel relied on
      the following observation in Consumer Online Foundation:

      6
H         2022 (1) SCR 700
       CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                          333
            AIRPORT LTD [S. RAVINDRA BHAT, J.]

          “the object 8 of Parliament in inserting Section 22A in the          A
          2004 Act by the Amendment Act of 2003 is to authorize by
          law the levy and collection of development fees from every
          embarking passenger de hors the facilities that the embarking
          passengers get at the existing airports. The nature of the levy
          under Section 22A of the 2004 Act, in our considered opinion,
                                                                               B
          is not charges C or any other consideration for services for
          the facilities provided by the Airports Authority.”
       18. It was argued by learned counsel that the taxable activity did
not occur in this case, as the collections were intended for future
developments whereas the ‘airport’ referred to in Section 65(105)(zzm)
is an existing airport. Counsel urged that such statutory levies were in       C
the nature of cess or tax and were not liable to taxation. Counsel
emphasized that the ruling of the Kerala High Court in Cochin
International Airport Limited vs. Collector Central Excise7 has held
that UDF is collected to fulfil the funding gap for development of airports,
and cannot be termed as service. This ruling was upheld by this court8 .       D
In these circumstances, there is no merit in the revenue’s submission
that development fee is collected for rendering services.
       19. Learned counsel relied on the impugned orders to say that to
be liable to tax, service should be rendered to a person by a specifically
described service provider in an airport. The scope of activities of the       E
assessee vis-a-vis passengers who bear the burden of development fee
needs a closer look. Passengers in an airport intend to travel by an airline
which has the said airport as a scheduled port of call. The contractual
nature of this relationship is enshrined in the ticket which provides access
to the airport, process through check-in and security, space for waiting
and necessary amenities and provision for boarding an aircraft. There is       F
nothing to show that passengers have to make payments for any of
these activities. These facilities were available without any additional
charge before the imposition of ‘development fee’. Such services continue
to be available after its quashing. No additional benefit accrues to the
passenger during the period of levy of ‘development fee.’ All facilities       G
are basic facilities inherent in the civil aviation sector in which the
appellant, a non-public sector entity, is a recent entrant.

7
    2009 (16) STR 401 (Ker.)
8
    in 2010 (17) S.T.R. J79 (S.C.)                                             H
334             SUPREME COURT REPORTS                           [2023] 7 S.C.R.


A            20. It was emphasized that moving away from state control, airports
      entered the phase of regulatory control with the advent of the AAI Act.
      This transition also had to factor in the larger public interest in safety
      and security, which meant that some level of control, de-regulation was
      limited and confined to the financial aspects of airport management.
      Having created a statutory authority, the statute should have been specific
B
      to contain the scope of functions of the AAI. Despite granting financial
      autonomy, the need for dependence on the State exchequer could not be
      eliminated and hence appropriate types of levies as well as restrictions
      on their utilization were incorporated in the statute. It was contended
      that Sections 22 and 22A of the AAI Actare in the context of substitution
C     of the constitutional funds of the Union of India, for deposit and drawing
      with that of the accounts of AAI.
              21. The assesses urge that Section 22 of the AAI Act enables
      AAI to charge for the facilities it provides. However, the levy under
      Section 22A [of the AAI Act] is compulsorily charged from passengers;
D     it is placed in an escrow account owing to the restricted purpose for
      which such fee collected can be used. Hence, there is a substantive
      difference between a charge under Section 22 and levy under Section
      22A. The charge under Section 22, paid by any passenger, may be a
      consideration for a service and subjected to service tax. However, the
E     same principles are not applicable to a levy under Section 22A, which is
      independent of Section 22 and is not for any service rendered.
              22. Counsel underlines that this court in Consumer Online
      Foundation (Supra) has declared the law and has interpreted both
      Section 22 and Section 22A of the AAI Act. This court has held that
F     charges collected under Section 22 are for different services and facilities
      provided to the third parties by the lessee of AAI. Collections under
      Section 22A of the AAI Act, this court has ruled, are “dehors the
      facilities that the embarking passengers get at the existing airports”.
      There is also a specific finding that there is no contractual relationship
G     between the passengers and the AAI for the funds collected under
      Section 22A of the AAI Act. Further, it was highlighted that in the same
      judgment, it was held that charges under Section 22A:
            “are not charges or any other consideration for services for
            the facilities provided by the Airports Authority.”
H
       CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                          335
            AIRPORT LTD [S. RAVINDRA BHAT, J.]

      The court decisively held that development fee is “really in the         A
nature of a cess or a tax for generating revenue for specific
purpose.” And, further, that amounts collected are accountable to the
AAI, which would ensure that such fee levied and collected are “utilized
for the purposes mentioned in Section 22A (a) of the AAI Act.”
      23. It was argued that in view of the declaration of law, CESTAT         B
correctly held that the charges collected by the assesses under Section
22A of the AAI Act cannot be regarded as considered for services
rendered.
       24. Learned counsel submitted that the decision in Krishi Upaj
Mandi Samiti (supra) is distinguishable. In that case, the court was           C
concerned only with Section 9 (2) of the Rajasthan Agricultural Produce
Markets Act, 1961, which was held not to relate to a statutory function but
only a discretionary charge, i.e., renting of premises. Rent for immovable
property is materially different from a collection under Section 22A of the
AAI Act, which, according to this court, is in the nature of cess or tax and
a compulsory exaction in Consumer Online Foundation (supra).                   D
       25. The assesses also rely on the decision of this court in
Commissioner of Service Tax vs. Bhayana Builders (P) Ltd9, where
it was stated that under Section 67 of the Finance Act, 1994,not every
amount charged by the service provider is taxable. Upon an analysis of
Section 67, it was held that the amount charged should be “for such            E
service provided” to be taxable. The court emphasized the connection
between the service and the amount by stating that:
         “the Act has provided for a nexus between the amount charged
         and the service provided”.
      26. Counsel pointed out that Consumer Online Foundation (supra)          F
has ruled that there is no nexus between the amounts charged under
Section 22A of the AAI Act and any service provided. In the absence of
a nexus between the amount charged as DF/UDF and any service
rendered, such amounts cannot be liable to service tax.
                                    IV                                         G
         Analysis and Conclusions
      27. In the decision of this court, in Consumer Online Foundation
(Supra), the context was the validity of the levy of development fees
9
    2018 (1) SCR1128                                                           H
336             SUPREME COURT REPORTS                              [2023] 7 S.C.R.


A     and their collection from embarking passengers by lessees of airports,
      under OMDAs, including the DIAL in this case. The court examined
      the history of airport regulation in India, including the legislation concerning
      it, and, after analysing the provisions of the AAI Act, including the
      amendment to it, in 2003, held that:
B            “12. The functions of the Airports Authority under clause
             (aa) of sub-section (3) of Section 12 also inserted by the
             Amendment Act of 2003 to establish airports, or assist in the
             establishment of private airports by rendering such technical,
             financial or other assistance which the Central Government
             may consider necessary for such purposes cannot be assigned
C            to the lessee under Section 12A Section 12A of the 1994 Act.
             The Amendment Act of 2003 which also inserted Section
             12A therefore provides in sub-section (1) of Section 12A that
             the Airports Authority can make a lease of the premises of an
             airport (including buildings and structures thereon and
D            appertaining thereto) to carry out “some” of its functions
             under Section 12 as the Airports Authority may, in the public
             interest or in the interest of better management of airports,
             deem fit. Obviously, “a lease of premises of an airport” as
             contemplated in sub-section (1) of Section 12A cannot include
             establishing an airport or assisting in establishment of private
E            airports as contemplated in clause (aa) of sub-section (3)
             of Section 12 of the Act.
             13. To enable the Airports Authority to perform its statutory
             function of establishing a new airport or to assist in the
             establishment of private airports, the legislature has thought
F            it fit to empower the Airports Authority to levy and collect
             development fees as will be clear from clauses (b) and (c)
             of Section 22A of the 1994 Act. Such development fees levied
             and collected under Section 22A can also be utilized for
             funding or financing the costs of up-gradation, expansion
G            and development of an existing airport at which the fees is
             collected as provided in clause (a) of Section 22A of the Act
             and in case the lease of the premises of an existing airport
             (including buildings and structures thereon and appertaining
             thereto) has been made to a lessee under Section 12A of the
             Act, the Airports Authority may meet the costs of up-gradation,
H
CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                       337
     AIRPORT LTD [S. RAVINDRA BHAT, J.]

 expansion and development of such leased out airport to a           A
 lessee, but this can be done only if the rules provide for such
 payment to the lessee of an airport because Section 22A says
 that the development fees are to be regulated and utilized in
 the manner prescribed by the Rules. Since the lessee of an
 airport cannot be assigned the function of the Airports
                                                                     B
 Authority to establish airports or assist in establishing private
 airports in lieu of the existing airports at which the
 development fees is being collected, the lessee cannot under
 sub-section (4) of Section 12A have the power of the Airports
 Authority under Section 22A of the 1994 Act to levy and collect
 development fees. This is because sub-section (4) of Section        C
 12A provides that the lessee can have all those powers of the
 Airports Authority which are necessary for performance of
 such functions as assigned to it under sub-section (1)
 of Section 12A in terms of the lease. Moreover, since we have
 held that the function of establishment and development of a
                                                                     D
 new airport in lieu of an existing airport and the function of
 establishing a private airport are exclusive functions of the
 Airports Authority under the 2004 Act, and these statutory
 functions cannot be assigned by the Airports Authority under
 lease to a lessee under Section 12A of the Act, the lease
 agreements, namely, the OMDA and the State Support                  E
 agreement could not make a provision conferring the right
 on the lessee to levy and collect development fees for the
 purpose of discharging these statutory functions of the
 Airports Authority. We, therefore, do not think it necessary to
 refer to the clauses of the OMDA and the State Support
                                                                     F
 Agreements executed in favour of the two lessees to find out
 whether the right of levying and collecting the development
 fees has been assigned to the lessees or not.”
 28. This court further held as follows:
 “It will be clear from a bare reading of Sections 22 and 22A        G
 that there is a distinction between the charges, fees and rent
 collected under Section 22 and the development fees levied
 and collected under Section 22A of the 1994 Act. The charges,
 fees and rent collected by the Airports Authority under Section
 22 are for the services and facilities provided by the Airports
                                                                     H
338      SUPREME COURT REPORTS                        [2023] 7 S.C.R.


A     Authority to the airlines, passengers, visitors and traders
      doing business at the airport. Therefore, when the Airports
      Authority makes a lease of the premises of an airport
      (including buildings and structures thereon and appertaining
      thereto) in favour of a lessee to carry out some of its functions
      under Section 12, the lessee, who has been assigned such
B
      functions, will have the powers of the Airports Authority
      under Section 22 of the Act to collect charges, fees or rent
      from the third parties for the different facilities and services
      provided to them in terms of the lease agreement. The legal
      basis of such charges, fees or rent enumerated in Section 22 of
C     the 2008 Act is the contract between the Airports Authority
      or the lessee to whom the airport has been leased out and the
      third party, such as the airlines, passengers, visitors and
      traders doing business at the airport. But there can be no
      such contractual relationship between the passengers
      embarking at an airport and the Airports Authority with regard
D
      to the upgradation, expansion or development of the airport
      which is to be funded or financed by development fees as
      provided in clause (a) of Section 22A. Those passengers who
      embark at the airport after the airport is upgraded, expanded
      or developed will only avail the facilities and services of the
E     upgraded, expanded and developed airport. Similarly, there
      can be no contractual relationship between the Airports
      Authority and passengers embarking at an airport for
      establishment of a new airport in lieu of the existing airport
      or establishment of a private airport in lieu of the existing
      airport as mentioned in Clauses (b) and (c) of Section 22A of
F
      the 1994 Act. In the absence of such contractual relationship,
      the liability of the embarking passengers to pay development
      fees has to be based on a statutory provision and for this
      reason Section 22A has been enacted empowering the
      Airports Authority to levy and collect from the embarking
G     passengers the development fees for the purposes mentioned
      in clauses (a), (b) and (c) of Section 22A of the Act. In other
      words, the object of Parliament in inserting Section 22A in
      the 2004 Act by the Amendment Act of 2003 is to authorize by
      law the levy and collection of development fees from every
      embarking passenger de hors the facilities that the embarking
H
    CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                         339
         AIRPORT LTD [S. RAVINDRA BHAT, J.]

      passengers get at the existing airports. The nature of the levy      A
      under Section 22A of the 2004 Act, in our considered opinion,
      is not charges or any other consideration for services for the
      facilities provided by the Airports Authority. This Court has
      held in Vijayalakshmi Rice Mills &Ors v Commercial Tax
      Officers, Palakot&Ors (supra) that a cess is a tax which
                                                                           B
      generates revenue which is utilized for a specific purpose.
      The levy under Section 22A though described as fees is really
      in the nature of a cess or a tax for generating revenue for the
      specific purposes mentioned in clauses (a), (b) and (c)
      of Section 22A.
                                                                           C
      15. Once we hold that the development fees levied
      under Section 22A is really a cess or a tax for a special
      purpose, Article 265 of the Constitution which provides that
      no tax can be levied or collected except by authority of law
      gets attracted and the decisions of this Court starting from
      The Trustees of the Port of Madras v M/s Aminchand Pyarelal          D
      (supra), cited on behalf of the Union of India and DIAL and
      MIAL on the charges or tariff levied by a service or facility
      provided are of no assistance in interpreting Section 22A. It
      is a settled principle of statutory interpretation that any
      compulsory exaction of money by the Government such as a
                                                                           E
      tax or a cess has to be strictly in accordance with law and for
      these reasons a taxing statute has to be strictly construed. As
      observed by this Court in Ahmedabad Urban Development
      Authority v Sharadkumar Jayantikumar Pasawalla & Ors.
      (supra), it has been consistently held by this Court that
      whenever there is compulsory exaction of money, there should         F
      be specific provision for the same and there is no room for
      intendment and nothing is to be read or nothing is to be implied
      and one should look fairly to the language used. Looking
      strictly at the plain language of Section 22A of 1994 Act before
      its amendment by the 2008 Act, the development fees were to          G
      be levied on and collected from the embarking passengers
      “at the rate as may be prescribed”.
       29. The observations and findings extracted above are decisive
about the nature of development fee, collected under Section 22A; they
are statutory exactions and not fees or tariffs, as was contended by the
                                                                           H
340            SUPREME COURT REPORTS                           [2023] 7 S.C.R.


A     Union of India. In fact, the court even underlined that the “nature of the
      levy under Section 22A of the 2004 Act, in our considered opinion,
      is not charges or any other consideration for services for the
      facilities provided by the Airports Authority.”
              30. By virtue of Section 67 of the Finance Act, the basis of charge
B     is the value of taxable service. Section 67 as it stood, before amendment
      w.e.f. April 18, 2006, read as follows:
            “67. Valuation of taxable services for charging service tax. -
            For the purposes of this Chapter, the value of any taxable
            service shall be the gross amount charged by the service
C           provider for such service provided or to be provided by him.
            ******************
            ******************
            Explanation 3.-For the removal of doubts, it is hereby declared
            that the gross amount charged for the taxable service shall
D           include any amount received towards the taxable service
            before, during or after provision of such service.”
            (i) in a case where the provision of service is for a consideration
            in money, be the gross amount charged by the service provider
            for such service provided or to be provided by him;
E
            (ii) in a case where the provision of service is for a
            consideration not wholly or partly consisting of money, be
            such amount in money as, with the addition of service tax
            charged, is equivalent to the consideration;

F           (iii) in a case where the provision of service is for a
            consideration which is not ascertainable, bet he amount as
            may be determined in the prescribed manner.
            After Section 67 (4), the following explanation to the entire
            section read as follows:
G           “Explanation.- For the purposes of this section.
            (a) “consideration” includes any amount that is payable for
            the taxable services provided or to be provided;
            (b) “money” includes any currency, cheque, promissory note,
            letter of credit, draft, pay order, travellers cheque, money
H
    CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                            341
         AIRPORT LTD [S. RAVINDRA BHAT, J.]

      order, postal remittance and other similar instruments but does         A
      not include currency that is held for its numismatic value.”
      31. After the amendment, Section 67 of the Act read as follows:
      “Section 67. Valuation of taxable services for charging service
      tax (1) Subject to the provisions of this Chapter, service tax
      chargeable on any taxable service with reference to its value           B
      shall-
      (i) in a case where the provision of service is for a consideration
      in money, be the gross amount charged by the service provider
      for such service provided or to be provided by him;
                                                                              C
      (ii) in a case where the provision of service is for a
      consideration not wholly or partly consisting of money, be
      such amount in money, with the addition of service tax
      charged, is equivalent to the consideration;
      (iii) in a case where the provision of service is for a                 D
      consideration which is not ascertainable, be the amount as
      may be determined in the prescribed manner.”
       32. This court, in Bhayana Builders (supra), ruled that to attract
service tax levy, a taxable service has to be provided to a recipient, by a
service provider, for a consideration and in the absence of any nexus
                                                                              E
to any service rendered, an amount charged, or value of service or goods
provided without a consideration, would not be a taxing incident. The
court held that:
      “Section 67 clearly indicates that the gross amount charged
      by the service provider has to be for the service provided.
                                                                              F
      Therefore, it is not any amount charged which can become
      the basis of value on which service tax becomes payable but
      the amount charged has to be necessarily a consideration
      for the service provided which is taxable under the Act. By
      using the words “for such service provided” the Act has
      provided for a nexus between the amount charged and the                 G
      service provided.
      Therefore, any amount charged which has no nexus with the
      taxable service and is not a consideration for the service
      provided does not become part of the value which is taxable
      under Section 67.”                                                      H
342                SUPREME COURT REPORTS                         [2023] 7 S.C.R.


A            33. On 02.08.2011, the Airports Authority of India (Major Airports)
      Development Fees Rules 2011 (hereafter “the 2011 Rules”) came into
      force. They, by Rule 3, authorized the collection of development fees;
      by Rule 4 (1), an Escrow account had to be opened in respect of each
      airport into which the development fee collections were to be deposited;
      by Rule 4 (2), AAI is empowered to monitor and regulate the receipts
B
      and utilization of fees; by Rule 4 (3), various sub accounts were to be
      opened [(a) Development Fees Receipt Account; (b) Development Fees
      Statutory Dues Account; (c) Development Fees Disbursement Account;
      (d) Development Fees Surplus Account]. By Rule 4 (4), the money
      collected as development fees is to be deposited in the Development
C     Fees Receipt Account.
             34. Besides the rules, the assessee, in the case of DIAL, has
      placed on the record, a letter issued to it, by AAI which imposes controls
      on the utilization of amounts collected as development fee; apart from
      the fact that the amounts are deposited in an escrow, any plan for utilization
D     has to be approved. Unlike fees, rent, charges etc., provided under Section
      22 of AAI Act, assessee companies are authorized on behalf of the AAI
      to levy and collect ‘development fee’ under Section 22A of the AAI Act
      on behalf of the AAI and was applied for generating revenue for utilization
      of the same for the specific purpose provided under sub- clause (a), (b)
      and (c) of section 22(A) of the AAI Act. The UDF collected by the
E     assessee is to bridge the funding gap of project cost for the development
      of future establishment at the airports. There is nothing on record to
      show that any additional benefit has accrued to passengers, visitors,
      traders, airlines etc., upon levy of UDF during the period in question in
      the present case.
F            35. There is a distinction between the charges, fee and rent etc.
      collected under Section 22 of the AAI Act and the UDF levied and
      collected under Section 22A of the AAI Act. It is that the UDF is in the
      form of ‘tax orcess’ collected for financing the cost of future projects
      and there was no consideration for services provided by the assessee to
G     the customer, visitors, passengers, vendors etc. The aggregate of
      collections in the bank accounts do not form part of profitand loss account.
          36. It is also useful to notice that by a circular issued by the
      CBEC10, on 18.12.2006, it was clarified that collection of amounts, by

      10
H          Circular No. 89/7/2006- ST dated 18.12.2006
    CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                        343
         AIRPORT LTD [S. RAVINDRA BHAT, J.]

way of taxes, sovereign or statutory dues, would not be subjected to      A
service tax levy:
      “Subject: Applicability of service tax on fee collected by Public
      Authorities while performing statutory functions /duties under
      the provisions of a law – regarding
                                                                          B
      A number of sovereign/public authorities (i.e. an agency
      constituted/set up by government) perform certain functions/
      duties, which are statutory in nature. These functions are
      performed in terms of specific responsibility assigned to them
      under the law in force. For example, the Regional Reference
      Standards Laboratories (RRSL) undertake verification,               C
      approval and calibration of weighing and measuring
      instruments; the Regional Transport Officer (RTO) issues
      fitness certificate to the vehicles; the Directorate of Boilers
      inspects and issues certificate for boilers; or Explosive
      Department inspects and issues certificate for petroleum
                                                                          D
      storage tank, LPG/CNG tank in terms of provisions of the
      relevant laws. Fee as prescribed is charged and the same is
      ultimately deposited into the Government Treasury. A doubt
      has arisen whether such activities provided by a sovereign/
      public authority required to be provided under a statute can
      be considered as ‘provision of service’ for the purpose of          E
      levy of service tax.
      2. The issue has been examined. The Board is of the view that
      the activities performed by the sovereign/public authorities
      under the provision of law are in the nature of statutory
      obligations which are to be fulfilled in accordance with law.       F
      The fee collected by them for performing such activities is in
      the nature of compulsory levy as per the provisions of the
      relevant statute, and it is deposited into the Government
      treasury. Such activity is purely in public interest and it is
      undertaken as mandatory and statutory function. These are           G
      not in the nature of service to any particular individual for
      any consideration. Therefore, such an activity performed by
      a sovereign/public authority under the provisions of law does
      not constitute provision of taxable service to a person and,
      therefore, no service tax is leviable on such activities.
                                                                          H
344            SUPREME COURT REPORTS                          [2023] 7 S.C.R.


A           3. However, if such authority performs a service, which is not
            in the nature of statutory activity and the same is undertaken
            for a consideration not in the nature of statutory fee/levy,
            then in such cases, service tax would be leviable, if the activity
            undertaken falls within the ambit of a taxable service.”
B            37. This circular was interpreted in Krishi Upaj Samiti (supra).
      The court held that the fee collected in that case could not be said to be
      a statutory exaction or levy, but was for consideration:
            “10. The aforesaid submission seems to be attractive but has
            no substance. Section 9(2) is an enabling provision and the
C
            words used is “market committee may”. It is to be noted that
            insofar as sub-section (1) of Section 9 is concerned, the word
            used is “shall”. Therefore, wherever the legislature intended
            that the particular activity is a mandatory statutory, the
            legislature has used the word “shall”. Therefore, when under
D           sub-section (2) of Section 9, the word used is “may”, the
            activities mentioned in Section 9(2)(xvii) cannot be said to be
            mandatory statutory duty and/or activity. Under Section 9(2),
            it is not a mandatory statutory duty cast upon the Market
            Committees to allot/lease/rent the shop/platform/land/space
            to the traders. Hence, such an activity cannot be said to be a
E
            mandatory statutory activity as contended on behalf of the
            appellants. Even the fees which is collected is not deposited
            into the Government treasury. It will go to the market committee
            fund and will be used by the market committee(s). In the facts
            of the case on hand, such a fee collected cannot have the
F           characteristics of the statutory levy/statutory fee. Thus, under
            the 1961 Act, it cannot be said to be a mandatory statutory
            obligation of the Market Committees to provide shop/land/
            platform on rent/lease. If the statute mandates that the Market
            Committees have to provide the land/shop/platform/space on
G           rent/lease then and then only it can be said to be a mandatory
            statutory obligation otherwise it is only a discretionary
            function under the statute. If it is discretionary function, then,
            it cannot be said to be a mandatory statutory obligation/
            statutory activity. Hence, no exemption to pay service tax can
            be claimed.”
H
    CENTRAL GST DELHI - III v. DELHI INTERNATIONAL                            345
         AIRPORT LTD [S. RAVINDRA BHAT, J.]

       38. The principal holding, so to say, was that the discretionary fee   A
could be levied, and that there was no “duty cast upon the Market
Committees to allot/lease/rent the shop/platform/land/space to the
traders”. The second reason was that the amounts were credited to a
market fund, which was later deposited in the government treasury, even
after which it remained a market committee fund.
                                                                              B
       39. In the present case, undoubtedly, 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 this court’s opinion, does not render UDF any less a
statutory levy. Firstly, the ruling in Consumer Online Foundation             C
(Supra) 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. In this regard, the fact that the amount is not
                                                                              D
deposited in a government treasury, per se, does not make it any less
a statutory levy or compulsory exaction. Nor does its discretionary
nature, (in the sense that it may not be necessarily levied always)
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.,       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               F
envisioned, under the 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,        G
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.
                                                                              H
346              SUPREME COURT REPORTS                    [2023] 7 S.C.R.


A            40. In view of the foregoing reasons, this court is of opinion
      that the impugned orders cannot be faulted. The revenue’s appeals
      therefore fail and are dismissed; in the circumstances, without order
      on costs.

B
      Nidhi Jain                                            Appeals dismissed.
      (Assisted by : Rakhi, LCRA)




C




D




E




F




G




H