ST - Appellant collects toll & deposits same with NHAI and either retains part of sum which was collected as toll or gets fixed amount by NHAI - collection of toll is not to be considered as BAS provided to NHAI: CESTAT
By TIOL News Service
MUMBAI, JULY 31, 2015: THE officers of DGCEI collected intelligence that the appellant were providing various services to National Highways Authority of India (NHAI) in relation to collection of toll which was chargeable to service tax under Business Auxiliary Service.
A SCN was issued demanding ST under the head "Business Auxiliary Service" for the period 01.07.2003 to 31.01.2007.
Having failed before the adjudicating authority, the appellant is before the CESTAT.
It is submitted that NHAI is constituted by an Act of Parliament, the National Highways Authority of India Act, 1988; that it is responsible for the development, maintenance and management of National Highways entrusted to it and for matters connected or incidental thereto; that it is a statutory function towards public welfare and not a business activity. Hence service, if any, provided by the appellant to NHAI cannot be said to be auxiliary to "business". It is also his submission that in the Toll Right Contract, which have been awarded to the appellant, there is no service provided to NHAI as toll is collected on appellant's own account for conducting its own business of toll collection; appellants are not agent/representative of NHAI for collection of toll; and under Toll Right Contract, by Rule 9 of National Highway Rules, appellant collect and retain the toll for themselves. It is his further submission that no consideration is flowing from NHAI to the appellant. In the entire contract, the money flows from the appellant to NHAI after successfully bidding the right for toll collection. Hence, appellant cannot be considered as agent/representative for levying service tax. Inasmuch as the activity of toll collection is not liable for service tax under the category of Business Auxiliary Service has been settled by the Tribunal in the case of Intertoll - 2011-TIOL-1005-CESTAT-DEL, PNC Construction Co. Ltd. & Patel Infrastructure P. Ltd. - 2013-TIOL-1567-CESTAT-AHM.
The AR reiterated the findings of the adjudicating authority.
The Bench observed -
++ Undisputedly, appellant are awarded contract by NHAI for collection of toll on three various National Highways which has been awarded by two contracts (i) Fixed Remuneration contract and (ii) Toll right contracts. In both the contracts, the appellant is collecting the toll and depositing the same with NHAI and either retains part of the amount which has been collected as toll or gets paid from NHAI by a fixed amount.
++ It is to be noted that the appellant herein is not promoting or marketing or selling goods produced by a client nor is he promoting or marketing services provided by the client, inasmuch that undisputedly NHAI is a statutory body which has been constituted by the National Highway Authorities of India Act, 1988; has been in force from 1988 and it gives the NHAI a statutory position. On perusal of the said Act, we find that NHAI is a statutory body for development, maintenance and management of national highway and other highway power which were to be exercised by the Government of India. It is also seen that the said Act also authorises the NHAI to collect an amount as a fees from the users.
++ The argument of AR (that the appellant is appointed as an agent or a representative of NHAI and is providing services on behalf of NHAI) needs to be discarded inasmuch NHAI is not providing any services to any of the users of the National Highway but is doing a sovereign function of developing, maintaining of the highway. We find the said agreement does not indicate anywhere that the appellant is appointed as an agent/representative and the said agreement talks of collection of amounts as "fee" to be known as "toll". In view of this, we find that the appellant is not rendering any service which is incidental or auxiliary on behalf of NHAI.
Placing reliance on the decisions cited (supra) the Bench held that in view of the authoritative judicial pronouncements on the issue, the collection of toll by the appellant is not to be considered as Business Auxiliary Service provided to NHAI.
The appeal was allowed with consequential relief.
(See 2015-TIOL-1549-CESTAT-MUM)
