2011 (5) TMI 192 - AT - Service Tax

Tribunal rules in favor of Swarna Tollway in service tax liability case

The Tribunal ruled in favor of M/s. Swarna Tollway (P.) Ltd. (STPL) in a case concerning the liability to pay service tax on toll collections. The ... Demand - Business Auxiliary Service - Service tax on Toll collection charges - Concession Agreement was executed between NHAI and CIDBI, whereunder NHAI granted to CIDBI (Concessionaire) the concession for a period of 30 years, including the exclusive right, licence and authority to implement the project and the concession in respect of the Project Highways - it is crystal clear that CIDBI alone is the concessionaire and the STPL is not a concessionaire but an agent of CIDBI - whether the toll charges were collected by STPL qua concessionaire, as claimed by them, or, in the capacity of an agent for CIDBI, as claimed by the Revenue - NHAI, being a party to the Concession Agreement and the Assignment Agreement, accepted STPL as the 'Concessionaire' and declared so in the above letter in unequivocal terms. Upon receipt of the letter from NHAI, the Commissioner of Service Tax ought not to have any doubt lingering in his mind about the status of the assessee in relation to the Concession Agreement - Held that: under the Concession Agreement, STPL was collecting toll charges on sections of NH-5 and NH-9 in the capacity of 'Concessionaire' and not any agent of CIDBI - Decided in favour of the assessee Issues Involved:1. Whether the assessee, M/s. Swarna Tollway (P.) Ltd. (STPL), is liable to pay service tax under 'Business Auxiliary Service' on toll collected from highway users.2. Whether the toll collected by STPL was in the capacity of a concessionaire or as an agent of CIDBI.3. Validity of penalties imposed on STPL under sections 76, 77, and 78 of the Finance Act, 1994.Issue-wise Detailed Analysis:1. Liability to Pay Service Tax under 'Business Auxiliary Service':The primary question was whether STPL was liable to pay service tax on the toll collected under the head 'Business Auxiliary Service'. The department issued show-cause notices demanding service tax on toll collections at various toll plazas for different periods, asserting that STPL acted as an agent for CIDBI by collecting toll on their behalf, thus falling under 'Business Auxiliary Service'.2. Capacity of STPL in Toll Collection (Concessionaire vs. Agent):The core dispute revolved around whether STPL collected toll as a concessionaire or as an agent of CIDBI. The department claimed STPL was an agent, citing that CIDBI was the original concessionaire and that STPL was merely collecting toll on CIDBI's behalf. This was based on the Concession Agreement and subsequent agreements, including the Assignment Agreement, which transferred the concession from CIDBI to STPL. The Commissioner upheld this view, stating CIDBI remained the concessionaire, and STPL was an agent, thus liable for service tax.3. Penalties Imposed:The Commissioner imposed penalties under sections 76, 77, and 78 of the Finance Act, 1994, along with the demand for service tax and interest. The penalties were based on the conclusion that STPL was acting as an agent and failed to pay the requisite service tax.Judgment Analysis:Factual Background and Agreements:The judgment detailed the agreements between NHAI, CIDBI, and STPL. Initially, NHAI entered into a Concession Agreement with CIDBI for highway development and toll collection. Subsequently, an Assignment Agreement transferred the concession to STPL, making STPL the Special Purpose Vehicle (SPV) for the project.Department's Allegation:The department alleged that STPL was acting as an agent for CIDBI, collecting toll on their behalf, and thus liable for service tax under 'Business Auxiliary Service'. This was based on the interpretation that CIDBI remained the concessionaire, and STPL was merely an agent.Assessee's Contention:STPL contended they were the concessionaire as per the Assignment Agreement and not an agent. They argued that toll collection was part of their role as concessionaire, thus not liable for service tax under 'Business Auxiliary Service'.Key Documents and Findings:1. Notification No. S.O.1212(E), dated 13th May 2009: This notification amended a previous notification, recognizing STPL as the concessionaire, replacing CIDBI.2. Letter from NHAI (19-5-2008): NHAI clarified that STPL was the concessionaire following the Assignment Agreement, and CIDBI ceased to be the concessionaire.Tribunal's Decision:The Tribunal found that the documents, including the amending notification and NHAI's letter, supported STPL's claim of being the concessionaire. The Tribunal held that STPL collected toll charges in the capacity of a concessionaire, not as an agent of CIDBI. Consequently, the basis for the department's show-cause notices collapsed.Conclusion:The Tribunal set aside the impugned orders, allowing STPL's appeals and dismissing the Revenue's appeal. It concluded that STPL was not liable to pay service tax under 'Business Auxiliary Service' as they collected toll charges as a concessionaire, not as an agent. The penalties imposed were also invalidated based on this conclusion.