The Chandigarh Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that toll collection on behalf of the National Highway Authority of India (NHAI) cannot be considered as a business auxiliary service.
PNC Infratech Ltd, the appellant was engaged in providing the services under “Business Auxiliary Services” alleging that they appeared to have contravened the provisions of Sections 68, 69 & 70 of the Finance Act, 1994 and Rules, 4, 5, 6 and 7 of Service Tax Rules, 1994 by providing the said taxable services without obtaining registration and without payment of service tax.
It was imputed that they were collecting toll tax at “Doraha Toll Plaza” on behalf of NHAI for a consideration of Rs. 14,25,900/- per month and had received an amount of Rs. 4,27,77,000/- from NHAI during the period 01.07.2003 to 31.01.2006 for their services at “Doraha Toll Plaza”, on which they have failed to pay service tax amounting to Rs. 39,46,036/- under the category of “Business Auxiliary Services”.
A show cause notice dated 23.05.2008 was issued alleging that toll operations undertaken by the appellant amounted to Business Auxiliary Services (BA) under Section 65(19) of the Finance Act, 1994 and thus the consideration received against “tolling operations” was liable to service tax for the period 01.07.2003 to 31.03.2006. The appellant filed the detailed reply to the SCN submitting that the services rendered by the Appellant to NHAI are not liable to service tax under “Business Auxiliary Service’.
After following due process, the adjudicating authority confirmed the demand of service tax along with interest and penalty.
It was viewed that the appellant was rendering service directly to NHAI and no service was being rendered to commuters on behalf of NHAI and therefore, the services undertaken by the appellant are not covered by BAS and not liable to pay tax.
In the case of Intertoll India Consultants (P.) Ltd. v. CCE [2011], the Tribunal held that toll tax and fee for use of the bridge, by retaining the percentage of such collection, the activity cannot be held to be falling under BAS.
A two-member bench comprising Mr S S Garg, Member (Judicial) and Mr P Anjani Kumar, Member (Technical) held that the impugned order is not sustainable in law and set-aside the impugned order by allowing the appeal of the appellant with consequential relief.
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