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Service Tax Tribunal says development fee charged by Delhi airport not taxable

PW Bureau 

The tribunal noted that no development tax can be charged since the airport levied a fee on future infrastructure and not of existing services  New Delhi: The Delhi bench of the Service Tax Tribunal has done away with the Rs 262-crore service tax demand on the Delhi International Airport Ltd (DIAL) for collecting ‘development fee’ from passengers. In its order last month, the tribunal noted that no development tax can be charged since the airport levied a fee on future infrastructure and not on existing services. The adjudicating authority of the revenue department upheld the Rs 262-crore service tax demand in 2016. Following which, DIAL had deposited Rs 130 crore under protest but service tax authorities appropriated the amount as interest and penalties on the demand. 

What did the order say?

During the period of levy of development fee, no additional benefit accrued to the passenger, the tribunal said in its order. The tribunal order said the airport’s facilities “were available without any additional charge before the imposition of development fee and continue to be available after its quashing.” The order cited a Supreme Court decision “which makes it abundantly clear that development fee is a levy for a future establishment.”

Govt permitted DIAL in 2009 to charge development fee

The Central government in 2009 permitted DIAL to levy a development fee of Rs 200 per departing domestic passenger and Rs 1,300 per departing international passenger. “The approval for the levy of development fees was allowed based on DIAL’s request to bridge the funding gap of the project cost,” the tribunal said. “After receiving the tax demand, DIAL had contended 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 to a levy,” it added.