2013 (10) TMI 1263 - AT - Service Tax

Construction of Road - contracts were on Build, Operate and Transfer (BOT) basis. The consideration for the services rendered under these contracts was recovered by collection of toll charges for a fixed tenure and appropriating the same towards the cost incurred. - The case of the Revenue is that collection of toll charges under the contracts comes within the purview of Business Auxiliary Services - Held that - The activity undertaken by the appellants herein is construction of roads. The same is excluded specifically from the scope of levy of service tax under the category of Commercial and Industrial Construction Service under Section 65(105)(zzq) and Works Contract Service under Section 65(105)(zzzzq). Further, under Maintenance and Repair Service under Section 65(105)(zzg) the activity has also been exempted from levy of service tax and the same has been given retrospective effect from the date of inception of the levy. Thus, it is very clear that the construction and repair of roads have been specifically excluded from the scope of levy of service tax by the Government. The appellants have been providing services of construction of roads. To finance/compensate the cost of construction, the contractors have been allowed to collect toll charges and the toll charges have been collected on their own behalf and for themselves. If that be so, they cannot be said to have rendered any Business Auxiliary Service for someone else. - Prima facie case is in favor of assessee - stay granted.

Summary

Issues:
Common issue of whether toll charges collected by the appellants for construction of roads fall under 'Business Auxiliary Services' for service tax purposes.

Analysis:
The judgment involves seven appeals and stay applications with a common issue. The appellants were awarded contracts for road construction on a Build, Operate, and Transfer (BOT) basis by various government entities. The Revenue claimed that toll charges collected under these contracts constitute 'Business Auxiliary Services' subject to service tax. The appellants argued that road construction services are not taxable under the Finance Act, specifically excluded from service tax levy. They highlighted exemptions for maintenance and repair services as well. The Revenue's position was reiterated by the Additional Commissioner, emphasizing the impugned orders.

Upon careful consideration, the Tribunal found that road construction services are excluded from service tax under various categories like 'Commercial and Industrial Construction Service' and 'Works Contract Service.' Additionally, maintenance and repair services were exempted with retrospective effect. The appellants' collection of toll charges was deemed for their own benefit to cover construction costs, not rendering 'Business Auxiliary Services' for others. A circular by the Central Board of Excise and Customs clarified that tolls paid by road users, including those under the BOT model, are not subject to service tax unless collected by an independent entity on behalf of the concessionaire.

Based on the arguments and the circular, the Tribunal granted a complete waiver of pre-deposit of the dues adjudged and stayed recovery during the appeals' pendency. Due to substantial revenue involved, the Tribunal scheduled all appeals for final disposal on a specific date and directed related appeals to be tagged together for efficiency in addressing the identical issue.