2013 (8) TMI 416 - AT - Service Tax

Classification of category under Business Auxiliary Services Whether the assessee was into the activity of Widening and Improvement of road or Collecting Toll charges Assessee contended that activity undertaken by them was widening and improvement of the road and they incurred cost for undertaking this activity and towards compensation for the cost incurred, they were permitted to collect Toll charges from the users of the highway - they have undertaken collection of Toll charges for themselves and not on behalf of NHAI - Held that - After reading of the Circular No. 152/3/2012-ST dated 22.2.2012 makes it absolutely clear that an SPV formed as a result of agreement between NHAI or State Authority and the concessionaire under the BOT arrangement, the Concessionaire cannot be considered as an agent of the NHAI. Waiver of pre deposit prima facie strong case in the favour of the assessee thus court allowed from the waiver of the pre deposit stay granted appeal decided in the favour of the assessee.

Summary

Issues:
- Classification of Toll charges as Business Auxiliary Service for Service Tax liability.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI was directed against an Order-in-Original passed by the Commissioner of Service Tax, Mumbai-II. The case involved M/s. IDAA Infrastructure Pvt. Ltd., engaged by NHAI for road extension and improvement on a BOT basis. The dispute arose when the department claimed that Toll charges collected by the appellant on behalf of NHAI fell under Business Auxiliary Service, making them liable for Service Tax. A show-cause notice demanding Service Tax was issued for the period 2006-07 and 2010-11. The appellant argued that they collected Toll charges for themselves to finance road widening and improvement, not on behalf of NHAI. They relied on Circular No.152/3/2012-ST, which clarified that under BOT arrangements, if an SPV collects Tolls on its own account, it is not subject to Service Tax.

The Commissioner (A.R.) representing the Revenue supported the lower authority's findings. The Tribunal, while considering the stay application, examined the Circular which stated that Tolls collected by an SPV under a BOT arrangement on its own account are not subject to Service Tax. The Tribunal noted that if Tolls are collected by the Concessionaire independently, it does not constitute a taxable service. Based on this clarification, the Tribunal granted an unconditional waiver from pre-deposit of the dues adjudged against the appellant in the impugned order, staying the recovery during the appeal's pendency. The judgment favored the appellant's argument that Toll charges collected for road improvement were not Business Auxiliary Services, aligning with the Circular's interpretation under the BOT arrangement.