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2013 (4) TMI 673 - AT - Service TaxService tax/interest/penalty - Business Auxiliary Service - Allegation is that the appellants have been authorized by the government or NHAI to collect toll charges on the use of the highways/roads constructed by them and, therefore, they have rendered a service and liable to pay tax. Held that- Appellants have undertaken the construction of roads. To finance/compensate for the cost of construction, the contractors have been permitted by the Government/NHAI to collect toll charges from the users of these roads. Thus the toll charges have been collected by the appellants on their own account. If that be so, they cannot be said to have rendered any Business Auxiliary Service . Thus, we are of the considered view that the activity of the appellant in construction of roads on BOT basis is not leviable to service tax either under commercial or industrial construction service, works contract service, maintenance, management or repair of immovable property service or under Business Auxiliary Service. Accordingly, the impugned orders is set aside.
Issues Involved:
Common issue of whether toll charges collected by appellants for road construction come under 'Business Auxiliary Services' for service tax purposes. Detailed Analysis: 1. Issue of Taxability of Toll Charges: The appellants were awarded contracts for road construction on Build, Operate and Transfer (BOT) basis. The Revenue claimed that toll charges collected by the appellants under these contracts fall under 'Business Auxiliary Services' and are subject to service tax. The appellants argued that road construction is excluded from service tax under various provisions like 'Commercial and Industrial Construction Service' and 'Works Contract Service.' They highlighted that toll charges were collected to recover construction costs and were not passed to the government or NHAI. 2. Exclusion from Service Tax Levy: The Tribunal analyzed the specific exclusions under the Finance Act, 1994, for construction services related to roads, airports, railways, etc. The activity of road construction undertaken by the appellants was found to be expressly excluded from service tax levy under 'Commercial or Industrial Construction Service' and 'Works Contract Service.' Additionally, maintenance and repair of roads were also exempted from service tax under relevant notifications. 3. Definition of Business Auxiliary Service: The Tribunal examined the definition of 'Business Auxiliary Service' under section 65(19) of the Finance Act, 1994. It was noted that the Revenue did not specify any sub-clause of business auxiliary service under which the appellants' services fell. The Tribunal criticized the lack of clarity in the show cause notice and impugned order, citing it as a violation of natural justice principles. 4. Clarifications by Central Board of Excise and Customs: The Tribunal referred to a circular issued by the Central Board of Excise and Customs, which clarified that toll charges collected by road service providers under BOT arrangements were not subject to service tax. The circular emphasized that tolls collected under the Public Private Partnership model were on the service provider's account and not on behalf of the government or NHAI. 5. Decision and Conclusion: After thorough consideration, the Tribunal concluded that the appellants' activity of road construction on BOT basis did not attract service tax under any relevant category, including commercial or industrial construction service, works contract service, maintenance, management, or repair of immovable property service, or business auxiliary service. The impugned orders were set aside, and the appeals were allowed on merits, providing consequential relief. Other issues raised by the appellants were not addressed as the appeals were allowed based on the taxability of toll charges. This detailed analysis of the judgment highlights the key legal arguments, statutory provisions, and clarifications that led to the Tribunal's decision regarding the taxability of toll charges in the context of road construction contracts.
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