ST on Toll charges - If on basis of agreement, contractor is authorised to collect toll charges from users and entire activity is done on BOT basis, there is no ST liability - Demand of Rs 30 Cr set aside: CESTAT
By TIOL News Service
MUMBAI, JAN 22, 2013: THE appellant is an ideal road builder and engaged in construction of highways i.e widening of the existing two-lane carriageway from KM 0/115 to KM 23/509 of Thane-Bhiwandi bye-pass road. The Public Works Department (PWD) of Government of Maharashtra awarded the contract for this purpose. To compensate the appellant for undertaking the work they were authorised to collect tolls from the users of the road at various places. The appellant collected tolls from the users. Let aside the fact that the departmental officers had commuted by this road and waved their identity card for not paying toll on more than one occasion, when it came to Service Tax, they were not the one to waive the demand notice.
The department was of the view that the appellant was required to discharge service tax liability on this activity under the category of "Business Auxiliary Service"and accordingly a show-cause notice dated 21/10/2011 was issued demanding a service tax of Rs.30,30,07,734/- on the total toll collection of Rs.264,06,80,930/- during the period 2006-07 to 2010-11.
The Commissioner, Service Tax, Mumbai did the rest inasmuch as he passed an O-in-O on 31/08/2012 saddling the applicant with the proposals made in the demand notice.
So, the appellant is before the CESTAT.
The appellant referred to the Board Circular no. 152/3/2012-ST dated 22/02/2012 and said that the Rs.30.30 Crore demand is not sustainable.
The Revenue representative merely reiterated the findings of the adjudicating authority.
The Bench after dispensing with the requirement of pre-deposit of the adjudged dues took up the appeal for consideration and disposal.
After reproducing the Board Circular dated 22/02/2012 referred by the applicant, the CESTAT observed -
"5.3 From the above circular it is clear that if on the basis of an agreement between the State authority and the concessionaire for construction of roads, the contractor is authorised to collect the toll charges from the users of the roads for the services rendered and the entire activity is done on Build-Own/Operate-Transfer basis, there is no service tax liability.
5.4 Construction of roads has been specifically excluded from the scope of service tax levy both under "Commercial and Industrial Construction Service"and "Works Contract Service". Further repair and maintenance of roads have also been exempted from service tax retrospectively in this year's budget. Thus the intention of the Government is to keep out road construction activity from the purview of service tax. If that be so, how can service tax be levied on the very same activity under Business Auxiliary Service? Such a view does not appeal to any reason or logic."
Holding that in view of the clarification given by the Board the impugned order does not sustain, the Bench set aside the same and allowed the appeal.
In passing: It is common practice for the field formations to ignore the munificence given by the Central Board of Excise & Customs through its Circulars. In the present case, the Board Circular is dated 22.02.2012 yet the Commissioner has turned a blind eye to the same and passed the o-in-o confirming the ST demand of more than Rs.30 Crores on 31 st August, 2012. Thankfully, the case has been decided by the CESTAT before Circular 967 was born!
The world is a fine place, and worth fighting for - Ernest Hemingway, For Whom the Bell Tolls
(See 2013-TIOL-136-CESTAT-MUM)
