2018 (11) TMI 924 - AT - Service Tax

Classification of services - Business Auxiliary service or not - activity of collection of toll - AMTRL selected the Appellant for the design, construction, operation and maintenance of the Ahmedabad-Mehsana Road Project. The appellant was also awarded a contract for the purpose of operation and maintenance of the said road - extended period of limitation. Held that - It is apparent that IL&FS has agreed to take up development, upgrading, repair, operation and maintenance of roads in the street on a commercial basis . The construction and operation and maintenance has been sub-contracted to the appellant by IL&FS through a corporate entity incorporated in the state and promoted by Govt. of Gujarat and IL&FS specifically for this purpose. From the above terms of the contract, it is apparent that the construction of road, and its operation and management have been undertaken strictly on commercial basis and the toll tax collected is being used for recovery of investment and operating cost on Build Own Operate Transfer (BOOT) basis. Merely because a project is funded by toll tax, it cannot be said no service has been provided. Especially on the ground that during the phase when the toll tax is collected, the property owned by a corporate, promoted by Govt. of Gujarat and IL&FS - it is apparent that the toll collected is a compensation given to a private operator for providing the services of road used to the public on BOOT basis. Thus, the facility and usage of road against payment of toll is a service provided by the AMTRL. Every user is a customer of AMTRL and the appellants are providing services to the customers (the users) on behalf of AMTRL and thus the activity would also be covered under clause (iii) of the definition of BAS. Time limitation - Held that - The appellants are providing the BAS and there is no doubt regarding the same. Merely, because they are collecting the said amount on behalf of the corporate entity backed by Government it does not constitute a bonafide belief for exemption. The definition of BAS is very clear. Thus, they cannot be given any benefit on account of limitation. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Classification of Toll Collection Activity under Business Auxiliary Service (BAS)
2. Applicability of Service Tax on Toll Collection Compensation
3. Definition and Interpretation of "Customer" in the Context of Toll Collection
4. Applicability of Extended Period of Limitation

Issue-wise Detailed Analysis:

1. Classification of Toll Collection Activity under Business Auxiliary Service (BAS):
The appellant, M/s Larson & Toubro Ltd., argued that their activity of toll collection does not fall under the definition of BAS as per Section 65(19) of the Act. They contended that their activities do not fit under clauses (i) to (iii) and that clause (iv) applies only to incidental or auxiliary services related to the first three clauses. They further argued that toll collection is a government tax and not a customer care service. The Tribunal, however, found that the appellant's activities, including toll collection, maintenance, and ensuring compliance with performance standards, constitute promotion or marketing of services provided by AMTRL. The Tribunal concluded that these activities fall under clause (ii) and (iii) of the BAS definition, as they are intended to maximize the revenue of AMTRL.

2. Applicability of Service Tax on Toll Collection Compensation:
The appellant argued that toll collection is a tax and should not attract service tax. The Tribunal clarified that the service tax demand was on the compensation received for toll collection services, not on the toll itself. The compensation is for services provided to AMTRL, which includes toll collection and other maintenance services. The Tribunal held that there is no exemption for services related to tax collection, thus the compensation received is subject to service tax.

3. Definition and Interpretation of "Customer" in the Context of Toll Collection:
The appellant argued that road users are not customers, thus their services cannot be classified under customer care service. They relied on the Tribunal's decision in Intertoll India Consultants (P) Ltd., which stated that road users are not customers. The Tribunal disagreed, stating that the definition of "customer" includes any person who buys goods or services, even if only once. The Tribunal found that road users, who pay tolls for road usage, qualify as customers of AMTRL. Therefore, the services provided by the appellant to these customers on behalf of AMTRL are covered under clause (iii) of BAS.

4. Applicability of Extended Period of Limitation:
The appellant contended that the extended period of limitation should not apply as they had started paying service tax from 10.09.2004 and there was no suppression of facts. The Tribunal found that the appellant was providing BAS and the definition was clear. The Tribunal held that merely collecting toll on behalf of a corporate entity backed by the government does not constitute a bona fide belief for exemption. Therefore, the extended period of limitation was applicable.

Conclusion:
The Tribunal dismissed the appeal, holding that the appellant's activities of toll collection and related services fall under the definition of BAS and are subject to service tax. The Tribunal also upheld the applicability of the extended period of limitation for the demand of service tax. The decision emphasized that toll collection compensation is taxable and that road users qualify as customers under the BAS definition.