The tribunal, in its order last month, held that development fee was levied for future development of the airport and not in lieu of any service.
The Rs 262-crore service tax demand was upheld by the adjudicating authority of the revenue department in 2016.
Thereafter, DIAL had deposited Rs 130 crore under protest. However, the amount was appropriated by the service tax authorities as interest and penalties on the demand.
The tribunal, in its order, said that no additional benefit accrued to the passenger during the period of levy of development fee.
The airport facilities “were available without any additional charge before the imposition of development fee and continue to be available after its quashing”, the tribunal order said.
It cited a Supreme Court decision “which makes it abundantly clear that development fee is a levy for a future establishment”, the order said. It added this reinforced the bench’s conclusion that there are no services being rendered for which this levy is being charged.
In 2009, the central government had allowed DIAL — a subsidiary of GMR Group — to levy Rs 200 per departing domestic passenger and Rs 1,300 per departing international passenger as development fee purely on an ad hoc basis.
The approval granted was subject to submission of the final project cost estimates. “The approval for the levy of development fees was allowed based on DIAL’s request to bridge the funding gap of the project cost.
“After receiving the tax demand, DIAL had contented that levy of DF is in the nature of statutory levy to fund a public purpose and not towards rendition of any service per se, and hence not subject of levy.”
Additionally, in another order passed by the service tax tribunal earlier this month, it set aside the service tax demand on DIAL for the ‘advance development cost’ received by it from developers engaged in developing the hospitality area around the airport. The order said that the agreement between DIAL and developers were not in the nature of ‘renting of immovable property’ but was more in nature of ‘land development.’
DIAL had roped in developers to build infrastructure for the additional area adjacent to the airport. According to the contract, these developers paid a certain amount to DIAL for building common facilities to be used by the public. The revenue department argued that such a payment was against services provided and hence liable to service tax.