Service Tax Demand on Adda-fees under ‘BSS’ Category is Not Sustainable in Law: CESTAT [Read Order]
The Tribunal reiterated the settled law that service tax is a contract based levy, meaning service tax is levied on a transaction between recipient and provider pursuant to a contract
The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside multiple service tax demands confirmed on adda fees, holding that such collections made under ‘Build, Operation and Transfer’ agreement for development of a public bus terminal do not constitute taxable “Business Support Service” under the Finance Act, 1994.
The appellant, Rohan And Rajdeep Infrastructure Pvt. Ltd., had entered into a concession agreement with the Punjab Infrastructure Development Board for construction, development, operation and maintenance of the Amritsar bus terminal. The appellant was permitted to collect adda fees from bus operators, against the investment made by them.
The department alleged that the adda fees collected from transporters amounted to consideration for providing facilities such as parking, embarking and disembarking of passengers, ticketing counters and other infrastructure. This, in turn, qualified as “Business Support Service” taxable under Section 65(105)(zzzq) read with Section 65(104c) of the Finance Act, 1994.
Resultantly, service tax demands along with interest and penalties under Sections 76, 77 and 78 were confirmed for periods ranging from October 2006 to March 2015.
The appellant contended that no support service to bus operators was provided as the entire activity was carried out under a concession agreement governed by the Punjab Infrastructure (Development & Regulation) Act, 2002. It was argued that the recipient of service, if any, was the State authority and not the bus operators. Further, the adda fees were fixed and notified by the State Government.
The Tribunal observed that service tax is a contract-based levy and liability has to be determined strictly on the basis of the contractual relationship between the service provider and the service recipient. It was noted that there was no privity of contract between the appellant and the bus operators.
The Bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member), held that it would be erroneous to treat development of a public bus terminal as a support service rendered to transport operators. The Tribunal further found that the adda fees were collected as consideration for recovery of project costs and could not be perceived as consideration for providing taxable services.
The Tribunal also held that a substantial part of the demand was barred by limitation, as the department had failed to establish suppression, fraud or misstatement necessary for invocation of the extended period.
Accordingly, the Tribunal set aside the impugned orders, allowing all the appeals with consequential relief.
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