2022 (4) TMI 368 - AT - Service Tax

Classification of services - business auxiliary services or not - Toll Charges - collection of Toll under a contract executed by NHAI in favour of the appellant - negative list of services - applicability of Boards Circular No.152/3/2012-ST dated 22.02.2012 - demand against the appellant has been confirmed based on the findings that the appellants were not the owner of the land made available for construction of road nor they had constructed road - invocation of extended period of limitation - penalty - HELD THAT - Vide the contract the user fee collection rights have been transferred by NHAI in favour of the appellants against a fixed weekly remittance irrespective of the amount of fee collected by the appellant whether it may be less or may be more. Thus all risks and rewards stands transferred by NHAI in favour of the appellant. Question of appellant being the agent of NHAI does not at all arise. The contract is apparently on principal to principal basis. Negative list of services or not - HELD THAT - The activity of collecting toll is covered under the negative list of services. The Appellant has been provided with the Fee Collection Rights i.e. the right to collect toll tax and not to provide any service on behalf of NHAI. Further the Appellant was not paid any definite collection charges or service charges for collecting the toll therefore the service provided by the Appellant by way of granting access to road on payment of toll charges is covered under negative list clause (h) to section 66D of the Finance Act 1994. No tax is leviable in the scenario - Expounding the same and as per facts of the present case the Appellant is not carrying out any activity for NHAI in fact NHAI is supplying rights to collect fees to the Appellant which falls within the ambit of goods . Further on receiving the right to collect toll the amount that the Appellant is collecting from the users of the road squarely falls in the ambit of toll and thus is not chargeable to service tax as per clause (h) of Section 66D of Finance Act 1994 and accordingly there is no liability of tax on the Appellant. Applicability of Circular No.152/3/2012 dated 22.02.2012 - HELD THAT - As per the facts of the case there is no retention by the Appellant rather he has to pay a fixed amount on weekly basis to NHAI irrespective of any collection. Hence the very basis on which ld. Adjudicating Authority has alleged that the Appellant has earned commission is held incorrect - Further the said circular is applicable when the collection of toll is made on behalf of NHAI and a part of toll collection is retained by the collection agency. However in the current case the Appellant was carrying out the said activity as an independent principal. No fixed amount has been retained by the Appellant on the contrary he is required to pay a fixed amount on weekly basis to NHAI. Thus consideration is flowing from the Appellant to NHAI and not vice-versa. Therefore the said circular is not applicable in the scenario and the department has erred in applying the circular in the present case. Extended period of limitation - Penalty - HELD THAT - Extended period of limitation cannot be invoked as the Appellant did not suppress any fact with intent to evade duty and issue involves interpretation of law. No corroborative evidence has been put forward by the department to support that there was a deliberate attempt on the part of the Appellant to suppress the material facts with an intent to evade payment of tax - Everything was disclosed to the department at the time of scrutiny therefore in any case extended period of limitation is not invokable in the scenario. Further as the Appellant was always in bona fide belief about the exemption on the services provided by him it is well settled law that extended period of limitation is not applicable case of bona fide belief about the taxability or applicability of exemption on the basis of reasonable grounds - For the same reason no question arises for imposition of penalty. The findings of Commissioner (Appeals) are held to be based on wrong assumptions and interpretations - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the collection of toll by the appellant amounts to providing Business Auxiliary Service.
2. Applicability of the negative list of services to the activity of collecting toll.
3. Interpretation of Circular No.152/3/2012-ST dated 22.02.2012.
4. Invocation of the extended period of limitation.
5. Correctness of the demand computation by the department.
6. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Whether the collection of toll by the appellant amounts to providing Business Auxiliary Service:
The primary issue was whether the appellant's activity of collecting toll under a contract with NHAI constituted providing Business Auxiliary Service. The department argued that the appellant was a service provider for NHAI, collecting toll on behalf of NHAI, thus falling under Business Auxiliary Service as defined under Section 65(19) of the Finance Act, 1994. However, the Tribunal found that the contract between NHAI and the appellant was on a principal-to-principal basis, not as an agent. The appellant was responsible for all risks and rewards and was not merely collecting toll on behalf of NHAI. Therefore, the appellant was not providing Business Auxiliary Service.

2. Applicability of the negative list of services to the activity of collecting toll:
The appellant contended that the activity of collecting toll was covered under the negative list of services. The Tribunal agreed, stating that the user fee collection rights were transferred by NHAI to the appellant for a fixed weekly remittance, irrespective of the amount collected. This arrangement did not constitute a service provided to NHAI. The Tribunal referenced Section 66B of the Finance Act, which excludes certain activities from the definition of service, and concluded that the appellant's activity fell under the negative list, specifically clause (h) of Section 66D.

3. Interpretation of Circular No.152/3/2012-ST dated 22.02.2012:
The department relied on Circular No.152/3/2012-ST to argue that the appellant was providing Business Auxiliary Service. However, the Tribunal found that the circular was misinterpreted. The circular applies when toll collection is made on behalf of NHAI and a part of the toll is retained by the collection agency. In this case, the appellant paid a fixed amount to NHAI and retained the toll collected, indicating a principal-to-principal relationship. Thus, the circular was not applicable.

4. Invocation of the extended period of limitation:
The Tribunal held that the extended period of limitation could not be invoked as the appellant did not suppress any facts with intent to evade duty. The appellant had a service tax registration, and all transactions were recorded in the books of accounts, disclosed to the department during scrutiny. The issue involved interpretation of law, and there was no deliberate attempt to evade tax. Therefore, the extended period of limitation was not applicable.

5. Correctness of the demand computation by the department:
The appellant argued that the demand computed by the department was incorrect as the amount was inclusive of tax. The Tribunal found that the appellant was not liable to pay service tax on the toll collected, as the activity was covered under the negative list of services. Therefore, the demand computation by the department was incorrect.

6. Imposition of penalty:
Given that the appellant was not liable for service tax and the extended period of limitation was not applicable, the Tribunal held that no penalty could be imposed. The appellant was in bona fide belief about the exemption on the services provided, and there was no deliberate attempt to evade tax.

Conclusion:
The Tribunal set aside the findings of the Commissioner (Appeals), holding that the appellant was not providing Business Auxiliary Service, the activity of collecting toll was covered under the negative list of services, and the extended period of limitation was not applicable. The order under challenge was set aside, and the appeal was allowed.