The Delhi bench of the CESTAT has held that an independent contractor is not liable to pay service tax while conducting the activity of toll collection on behalf of NHAI.
M/s Sitaram India Ltd, has been entrusted with the activity of toll collection by NHAI. As per the contract, the user fee collection rights have been transferred by NHAI in favour of the appellants against a fixed weekly remittance irrespective of the amount of fee collected by the appellant, whether it may be less or maybe more. The department, relying on a CBIC circular dated 22.02.2012, held that the appellants shall pay service tax for the same under the head “Business Auxilliary Services.”
Judicial Member Dr. Rachna Gupta held that the activity of collecting tolls is covered under the negative list of services. It was observed that the Appellant has been provided with the Fee Collection Rights i.e., the right to collect toll tax and not to provide any service on behalf of NHAI.
“Further, the Appellant was not paid any definite collection charges or service charges for collecting the toll, therefore, the service provided by the Appellant by way of granting access to the road on payment of toll charges is covered under negative list clause (h) to section 66D of the Finance Act, 1994. No tax is leviable in the scenario. Expounding the same and as per facts of the present case, the Appellant is not carrying out any activity for NHAI, in fact, NHAI is supplying rights to collect fees to the Appellant which falls within the ambit of ‘goods’. Further, on receiving the right to collect toll, the amount that the Appellant is collecting from the users of the road squarely falls in the ambit of toll and thus, is not chargeable to service tax as per clause (h) of Section 66D of Finance Act, 1994 and accordingly, there is no liability of tax on the Appellant,” the Tribunal said.
With regard to the applicability of the CBIC Circular, the Tribunal said, “Further, the said circular is applicable when the collection of toll is made on behalf of NHAI and a part of toll collection is retained by the collection agency. However, in the current case, the Appellant was carrying out the said activity as an independent principle. No fixed amount has been retained by the Appellant, on the contrary, he is required to pay a fixed amount on weekly basis to NHAI. Thus, consideration is flowing from the Appellant to NHAI and not vice-versa. Therefore, the said circular is not applicable in the scenario and the department has erred in applying the circular in the present case.”
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