2023 (2) TMI 831 - AT - Service Tax

Taxability - amount collected as toll (user fee) from user of toll roads under the category of Business Auxiliary Service under proviso to section 73(1) of the Finance Act, 1994 - period of show cause notice is from 01.12.2010 to 31.03.2013 - collection of toll /user fee by the appellant on behalf of NHAI tantamount to a service or not? HELD THAT - The allegation that the appellant worked as an Commission Agent on whose behalf he collects the toll, appears to have overlooked the underlying scheme of the tender which brought the appellant into this transaction. The contractual arrangement between the appellant and NHAI was for undertaking the collection of toll or user fee. The terms of the contract is very clear possession of the Kanwaliyas Toll Plaza asset is transferred to the appellant for the stream of lumpsum payment guaranteed by the appellant. Any deficit returns owing to decreased vehicular traffic or any other reason affects the revenue steam of the appellant. A Commission Agent is akin to a channel partner in delivery of goods/service, wherein the Principal bears all the risks. In the instant case, the tax liability does not arise by way of being Commission Agent as per section 65(19) of the Finance Act, 1994 for the period prior to introduction of negative list regime. This issue under consideration is squarely covered by the order of this Tribunal in the case of SOUVENIR DEVELOPERS INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX I 2022 (5) TMI 868 - CESTAT MUMBAI where it was held that Oversight by agencies of the state is intended to assure proper maintenance of the asset and fixation of rates is retained by the government to prevent exploitative exaction both of which are mandated by public interest and not as a facet of principal-agent equation. Thus, tax liability does not arise by way of being commission agent in section 65(19) of Finance Act, 1994 for the period prior to introduction of negative list regime. Appeal allowed.

Summary

Issues Involved:
1. Taxability of the amount collected as toll (user fee) under the category of Business Auxiliary Service.
2. Whether the appellant acted as a Commission Agent for NHAI.
3. Applicability of Section 66D(h) of the Finance Act, 1994 for the period from 01.07.2012 to 31.03.2013.

Detailed Analysis:

1. Taxability of the amount collected as toll (user fee) under the category of Business Auxiliary Service:

The appellant, M/s. Sangam India Limited, entered into agreements with the National Highway Authority of India (NHAI) for the collection of toll tax. The core issue was whether the collection of toll/user fee by the appellant on behalf of NHAI amounted to a service and whether such amount was chargeable to service tax. The appellant argued that they were an independent contractor with their own establishment and bore the risk of profit or loss from toll collection. The Tribunal noted that the appellant responded to a tender for toll collection and was responsible for maintenance costs, with any deficit affecting their revenue. The Tribunal found that the appellant was not acting as a Commission Agent but was independently managing toll collection, which did not fall under Business Auxiliary Service as per section 65(19) of the Finance Act, 1994.

2. Whether the appellant acted as a Commission Agent for NHAI:

The department argued that the appellant was acting on behalf of NHAI, collecting toll fees as a representative and thus should be considered a Commission Agent, making their services taxable. However, the Tribunal found that the contractual arrangement transferred the possession of the toll plaza to the appellant for a fixed payment, with the appellant bearing all risks of revenue fluctuation. This arrangement did not fit the definition of a Commission Agent, as the appellant was not merely facilitating a service but was independently responsible for toll collection and maintenance.

3. Applicability of Section 66D(h) of the Finance Act, 1994 for the period from 01.07.2012 to 31.03.2013:

For the period after 01.07.2012, the department contended that the services provided did not fall under the exemption in section 66D(h) of the Finance Act, 1994, which covers services by way of access to a road or bridge on payment of toll charges. The Tribunal referred to previous decisions, including Souvenir Developers India Pvt. Ltd vs Commissioner of Central Excise, which clarified that the exclusion from tax under the negative list applied to the service of access to roads or bridges, irrespective of who collected the toll. The Tribunal concluded that the appellant's services were covered under the negative list and were not taxable.

Conclusion:

The Tribunal set aside the Order-in-Original dated 24.03.2017, concluding that the appellant was not liable to pay service tax on the toll collected. The appeal was allowed, and the Tribunal consistently held that such toll collection services were not taxable under the Business Auxiliary Service category or as Commission Agent services. The judgment was pronounced in the open court on 21 February 2023.