In Brief
The Supreme Court held that User Development Fee (UDF) collected by airport operators from departing passengers is a statutory levy in the nature of a cess or tax, not a charge for services, and therefore is exempt from service tax. The Court distinguished between charges under Section 22 of the Airports Authority of India Act (for existing services/facilities, potentially taxable) and levies under Section 22A (for future airport development, non-taxable statutory exaction). Finding no nexus between UDF and any service rendered to passengers—and confirming that UDF merely bridges funding gaps for future projects—the Court dismissed the revenue's appeals, upholding CESTAT's orders that UDF is not liable to service tax.
The lawyer headnote and full judgment text are available to registered users.