Construction of BMTC’s Traffic and Transit Management Centres Not Taxable as Works Contract: CESTAT Dismisses Revenue's Appeal [Read Order]

The Chennai Bench of the CESTAT has held that the construction of Traffic and Transit Management Centres (TTMCs) for the Bangalore Metropolitan Transport Corporation (BMTC) is not liable to service tax, as the projects fall under the statutory exclusion for “transport terminals” under Section 65(105)(zzzza) of the Finance Act, 1994. The Tribunal upheld the adjudicating authority’s decision dropping the ₹9.7-crore demand issued against the appellant.

The dispute stemmed from a DGCEI allegation that the TTMCs at ITPL-Whitefield and Koramangala contained large commercial areas, shops, offices, food courts, ATM spaces and other rentable units which, according to the Department, transformed them into commercial complexes.

The appellant, Consolidated Construction Consortium Ltd, argued that the TTMCs were conceived as part of the JNNURM urban infrastructure plan, meant primarily as public transport hubs, with ancillary commercial spaces serving commuter needs. The adjudicating authority accepted this view and held that the essential character of the facilities remained that of bus terminals.

On appeal, the Tribunal, comprising AjayanT.V. (Judicial Member) and Ajit Kumar (Technical Member) noted that Revenue’s grounds were merely a repetition of the show cause notice and failed to engage with the detailed reasoning of the original authority. It held that the exclusion for works contracts relating to transport terminals is absolute, and the law does not permit dissecting terminal spaces based on usage ratios.

The presence of commercial amenities, the Bench observed, is common in modern transport facilities such as airports, metro stations and rail terminals, which remain excluded despite hosting extensive commercial outlets.

The Bench placed reliance on the Mumbai Tribunal’s ruling in B.G. Shirke Construction Technology Pvt Ltd, which concerned an identical BMTC TTMC project and held that such constructions cannot be vivisected for tax purposes merely because parts are leased out. The Tribunal also rejected allegations of suppression, noting CCCL’s disclosures in ST-3 returns, prior departmental audits and the project’s government-backed nature. Statements recorded under a threat of prosecution were held to weaken the Department’s credibility.

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The Tribunal additionally cautioned the Departmental Representative against advancing arguments beyond the scope of the show cause notice or persisting after the Bench indicates its position, stressing that such conduct hampers orderly adjudication.

Finding no infirmity in the adjudicating authority’s reasoning, the Tribunal dismissed the Revenue’s appeal and reaffirmed that TTMC construction for BMTC qualifies as a transport terminal and is therefore outside the ambit of service tax.

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