2012 (6) TMI 301 - AT - Service Tax

Private toll collection for NHAI deemed taxable as Business Auxiliary Services under Finance Act, 1994.

Ideal Road Builders (P.) Ltd. Versus Commissioner of Service Tax, Mumbai

The tribunal held that toll collection activities by a private company on behalf of a statutory authority, the National Highway Authority of India (NHAI), ... Demand of service tax - Business Auxiliary Services - business of toll collection on behalf of M/s. National Highway Authority of India (NHAI), in respect of the services rendered they received a fixed remuneration –Held that:- in the case of P.C. Paulose, Sparkway Enterprises (2011 (1) TMI 11 (SC)) activity would get covered under Section 65 clause 105(zzm) of the Finance Act, 1994. The provisions relating to constitution of Airport Authority of India and its collection of entry fees at the airport are more or less similar to the constitution of NHAI and its collection of toll charges. Therefore, if NHAI engages somebody else to collect toll charges on its behalf and pays them remuneration, the service so rendered would appear to merit classification under 'Business Auxiliary Service'. appellant directed to make a pre-deposit Issues:Classification of services under 'Business Auxiliary Services' for toll collection activities by a private company on behalf of a statutory authority. Liability to pay service tax, interest, and penalties under the Finance Act, 1994.Analysis:1. Issue of Classification: The case involved the classification of services provided by a private company engaged in toll collection activities on behalf of a statutory authority, the National Highway Authority of India (NHAI). The appellant argued that since NHAI's functions are statutory and not business-related, the services provided should not fall under 'Business Auxiliary Services' for service tax liability. The appellant cited precedents where similar toll collection activities were not considered taxable services. However, the tribunal analyzed NHAI's functions under the NHAI Act, noting that NHAI operates on business principles and collects fees for services rendered, which aligns with 'Business Auxiliary Services' classification. The tribunal differentiated between sovereign functions performed by the State and statutory functions carried out by NHAI, concluding that the toll collection activities were subject to service tax under the Finance Act, 1994.2. Precedents and Legal Interpretation: The tribunal referred to legal precedents, such as the case involving the Airport Authority of India, to support the classification of toll collection activities as 'Business Auxiliary Services.' Drawing parallels between NHAI's functions and those of other statutory bodies, the tribunal emphasized that activities like toll collection, when outsourced by NHAI, would indeed constitute taxable services. The tribunal's analysis highlighted the distinction between fees collected for specific services, as in the case of NHAI, and general tax imposition by the State, reinforcing the applicability of service tax to toll collection services under the relevant provisions of the Finance Act, 1994.3. Decision and Order: After considering arguments from both parties, the tribunal concluded that the appellant failed to establish grounds for a complete waiver of the dues adjudged in the impugned order. The tribunal directed the appellant to make a pre-deposit of a specified amount within a set timeframe to partially satisfy the tax liability, with the balance amount of service tax, interest, and penalties being waived and recovery stayed during the appeal's pendency. This decision was based on the tribunal's interpretation of NHAI's functions, the nature of toll collection activities, and the applicability of service tax laws to such services.In summary, the judgment addressed the classification of toll collection services under 'Business Auxiliary Services,' the liability for service tax, interest, and penalties under the Finance Act, 1994, and the tribunal's decision regarding the partial pre-deposit requirement to continue the appeal process.