2015 (8) TMI 592 - AT - Service Tax

Tribunal rules toll collection for NHAI not taxable, emphasizing sovereign function.

Ideal Road Builders Pvt Ltd Versus Commissioner of Service Tax, Mumbai

The Tribunal ruled in favor of the appellant, finding that their toll collection activities for NHAI do not constitute 'Business Auxiliary Service' ... Business Auxiliary Service - collection of toll / fee - appellant were providing various services to National Highway Authorities of India - Held that:- Appellant herein is not promoting or marketing or selling goods produced by a client nor is he promoting or marketing services provided by the client, inasmuch that undisputedly NHAI is a statutory body which has been constituted by the National Highway Authorities of India Act, 1988; has been in force from 1988 and it gives the NHAI a statutory position - On perusal of the agreement with the appellant and NHAI, we find the said agreement does not indicate anywhere that the appellant is appointed as an agent/representative and the said agreement talks of collection of amounts as 'fee' to be known as 'toll'. In view of this, we find that the appellant is not rendering any service which is incidental or auxiliary on behalf of NHAI - collection of tolls by the appellant is not considered as Business Auxiliary Service provided to NHAI - Decided in favour of assessee. Issues Involved:1. Whether the appellant's activity of toll collection for NHAI falls under the category of 'Business Auxiliary Service' liable to service tax.2. Applicability of limitation for the demand raised.3. Consideration of alternative arguments and notifications.Issue-Wise Detailed Analysis:1. Whether the appellant's activity of toll collection for NHAI falls under the category of 'Business Auxiliary Service' liable to service tax:The primary issue revolves around whether the appellant's toll collection activities for the National Highway Authorities of India (NHAI) qualify as 'Business Auxiliary Service' (BAS) and are thus subject to service tax. The appellant argued that NHAI, being a statutory body performing sovereign functions, does not engage in business activities. Therefore, the services provided by the appellant cannot be classified as auxiliary to any business. The appellant cited several Tribunal decisions, such as CST vs. Intertoll ICS CE Cons O&M P. Ltd., PNC Construction Co. Ltd. vs. CCE, and Patel Infrastructure P. Ltd. vs. CCE, which held that toll collection activities do not fall under BAS. The Tribunal agreed with the appellant, noting that NHAI is not a business entity but a statutory authority responsible for the development and maintenance of national highways. The Tribunal found that the appellant was not acting as an agent or representative of NHAI but was collecting tolls as part of a sovereign function. Consequently, the Tribunal concluded that the appellant's activities did not constitute BAS.2. Applicability of limitation for the demand raised:The appellant also raised a plea on limitation, arguing that the extended period for raising the demand was not applicable. However, since the Tribunal decided the case on merits, it did not delve into the limitation issue in detail. The Tribunal noted that various judicial forums had interpreted the issue differently, which could impact the applicability of the extended period. However, the primary focus remained on the nature of the service provided.3. Consideration of alternative arguments and notifications:The appellant presented alternative arguments, including the applicability of Notification 13/04-ST, which exempts certain services from service tax. The appellant contended that toll collection is a form of tax enforced by the Central Government and should be exempt. Additionally, the appellant argued that their activities did not fall under any specific clause of BAS, even after the definition was amended on 10.09.2004. The Tribunal, while acknowledging these submissions, primarily relied on the judicial precedents and the statutory nature of NHAI's functions to conclude that the appellant's activities were not taxable under BAS. The Tribunal did not record detailed findings on these alternative arguments, as the primary issue was resolved in favor of the appellant.Conclusion:The Tribunal set aside the impugned order, holding that the appellant's toll collection activities for NHAI do not fall under the category of 'Business Auxiliary Service' and are not liable to service tax. The appeal was allowed with consequential relief, if any.