Retrospective service tax exemption and toll collection treatment kept road maintenance and NHAI commission activity outside tax liability.

Retrospective exemption under Section 97 of the Finance Act, 2012 removed service tax liability on management, maintenance and repair of roads for the relevant past period, so the demand and related penalty could not survive. Toll collection undertaken on behalf of NHAI on a commission basis was also treated as outside Business Auxiliary Service, following settled Tribunal view, so the demand and related penalty on that activity were likewise unsustainable. The impugned order was set aside in full, with consequential relief to the assessee.

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Issues: (i) whether service tax demand on management, maintenance and repair of roads was sustainable in view of the retrospective exemption under Section 97 of the Finance Act, 2012; (ii) whether toll collection undertaken for NHAI on commission basis amounted to Business Auxiliary Service.

Issue (i): Whether service tax demand on management, maintenance and repair of roads was sustainable in view of the retrospective exemption under Section 97 of the Finance Act, 2012.

Analysis: Section 97 of the Finance Act, 2012 granted retrospective exemption to management, maintenance and repair of roads for the relevant past period. The disputed period fell within the range covered by that amendment, and the tax already paid on part of the activity had also been refunded. The demand on this count therefore could not survive.

Conclusion: The demand and penalty relating to management, maintenance and repair of roads were set aside in favour of the assessee.

Issue (ii): Whether toll collection undertaken for NHAI on commission basis amounted to Business Auxiliary Service.

Analysis: Toll collection on behalf of NHAI, with retention of a commission, had consistently been held by the Tribunal not to fall within the scope of Business Auxiliary Service. Following that settled view, the activity was not liable to service tax under that category.

Conclusion: The demand and penalty relating to toll collection were set aside in favour of the assessee.

Final Conclusion: The impugned order was set aside in full and the appeal succeeded with consequential relief.

Ratio Decidendi: A retrospective statutory exemption covering the relevant period extinguishes service tax liability for road maintenance activities, and toll collection on behalf of NHAI on a commission basis does not constitute Business Auxiliary Service.

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