High Court allows assessment on toll charges, clarifies tax treatment

The High Court held that assessment proceedings can proceed, but the respondents must separately quantify the amount claimed as service tax on toll charges. The court referred to a circular stating toll falls under the State List and is not covered by taxable services under the Finance Act. The petitioner argued that toll is an indirect tax collected from toll users and any profit earned is not commission but income after meeting expenses. The excess amount retained does not involve a service element as the toll collector is not providing a service to oneself.

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Issues involved: Assessment of service tax on toll charges retained by petitioner after payment to National Highway Authority of India.

The High Court held that assessment proceedings can continue, but the respondents must separately quantify the amount claimed as service tax on toll charges. The petitioner argued that toll falls under the State List and service tax cannot be imposed on it. The petitioner collects toll under an agreement with the National Highway Authority of India and cannot charge any amount other than what is specified in the agreement.

The Court referred to a circular stating that toll falls under the State List and is not covered by taxable services under the Finance Act. However, the respondents claimed that the excess amount retained by the toll collector is commission, leading to a service tax liability. The petitioner contended that toll is an indirect tax collected from toll users, and any profit earned is not commission but income after meeting expenses. The excess amount retained does not involve a service element, as the toll collector is not providing a service to oneself. The petitioner also argued that profits may not always accrue, and there could be cases of loss as well.

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