In a significant case, the Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that service tax is not demandable on toll charges collected in an independent capacity as a contractor. The tribunal found that the assessee obtained the right to collect toll under a contract and it has neither rendered any service to NHAI nor has acted as a commission agent for NHAI.
The Appellants M/s Premier Car Sales Ltd are engaged in trading of Motor Vehicles of Hyundai, and Honda two-wheelers and Piaggio three-wheelers. They have been registered under Service Tax for providing services of Servicing of Motor Vehicle’, `Business Auxiliary Services’ and `Renting of Immovable Property Services’.
During scrutiny of records of the Appellants, it was observed that they had availed Cenvat credit in respect of service tax paid on various input services like telephone service, courier service, business promotion, cleaning and housekeeping, insurance, maintenance or repairs, advertisement etc.
The appellants had entered into a contract with NHAI and obtained the right to collect toll tax at the toll plaza. It had to pay a fixed amount per week to the NHAI and the remaining amount of collection had to remain with the Appellants.
The impugned order has held that the Appellants are carrying out the activity for another person (NHAI) for consideration and therefore falls in the definition of service. It holds that the negative list entry under section 66D (h) covers access to a road or bridge on payment of toll charges. Services of toll charges on behalf of an agency authorized to levy tolls are like services used for providing the negative list services.
It was vehemently contended by the appellant that the collection of toll charges in terms of the contract with NHAI falls in the negative list under section 66D(h) of the Finance Act, 1994. They also contended that they have collected toll charges in their independent capacity as a contractor. It obtained the right to collect tolls under a contract. It has neither rendered any service to NHAI nor has acted as a commission agent for NHAI. Payment had been received from vehicle owners and not from NHAI.
A two-member bench of Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) relied on the case of Commissioner of Service Tax Vs. Ideal Road Builders Pvt. reported in 2018 wherein the Tribunal rejected the Departmental appeal after holding that the activity of toll collection by the respondent was not on behalf of NHAI/MSRDC but on their account, they have secured the right to collect the toll.
In light of the decisions of the Tribunal, the CESTAT set aside the demand on toll collection and allowed the appeal on the issue.
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