A ‘Commission Agent’ is akin to a channel partner in delivery of goods/service, wherein the Principal bears all the risks
The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed service tax demand as held that collection of Toll /User Fee on behalf of National Highway Authority of India (NHAI)does not amount to Service.
The appellant, M/s Sangam India Limited, entered into various agreements with National Highway Authority of India under which it was granted rights of collection of toll tax (user fee) at designated sites. NHAI is authorized to impose and collect such user fee for use of highways under of National Highways Act, 1956 read with relevant Rules.
The Appellant was given the right for collection of toll charges. Following the receipt of an intelligence that the appellant was engaged in providing taxable service and was not registered with the Service Tax department and was asked to submit various documents to the jurisdictional Service Tax authority.
A show cause notice was issued to the appellant that the appellant was liable to pay the amount to the NHAI only to the extent of bid amount as per the contract and entitled to retain the amount over and above the bid amount towards its consideration for the activities undertaken on behalf of its client.
The Counsel for the appellant contended that the amount payable by the appellant to NHAI was fixed as per the contract, and any loss or profit arising out of such collection, is to be borne by the appellant and it clearly indicates that the appellant was granted the right and collection of toll by NHAI for a fixed amount, which was regulated by the provisions of NHAI Act and user fees Rules.
The Counsel appearing for the department contended that the services rendered are liable to service tax under the category of Business Auxiliary Service under Section 65(105) (zzb) read with Section 65(19) of the Finance Act, 1994 upto 30.06.2012. With effect from 01.07.2012, ‘as per Section 65B(44) of Finance Act 1994, “service” includes any activity carried out by a person for another for consideration, hence services are not covered under any exemption granted vide Notification No. 25/2012 or any other notification.
The Coram consisting of observed that “The contractual arrangement between the appellant and NHAI was for undertaking the collection of toll or user fee. 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.
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