Business support service classification of concessionaire addafees examined; fees held nontaxable and timebarred demand overturned.

Classification turned on the contractual counterparty and purpose: the concessionaire's activities under a concession agreement and project site lease deed were held not to constitute taxable business support services to bus operators because the contract was with the public authority, the concessionaire collected governmentfixed addafees and the terminal served as a public utility; consequence: service tax demand under business support services set aside. Separately, the revenue's demand was timebarred because the assessee furnished all relevant information on 06.04.2009 and the SCN issued on 11.04.2012 exceeded the oneyear limitation without evidence of suppression or fraud; consequence: demand barred by limitation and appeals allowed.

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Issues: (i) Whether the adda-fees collected by the concessionaire are taxable as "Business Support Service" under Sections 65(104c) and 65(105)(zzzq) of the Finance Act, 1994; (ii) Whether the service tax demand in respect of the period October 2006 to September 2011 is time-barred by limitation.

Issue (i): Whether the adda-fees collected by the concessionaire from bus operators constitute a taxable "Business Support Service".

Analysis: The agreement between the concessionaire and the Authority (governed by the Punjab Infrastructure (Development & Regulation) Act, 2002) shows that the concessionaire constructed, financed, operated and was to transfer the terminal; the Authority retained title and the exclusive right to fix adda-fees; the concessionaire was permitted to collect adda-fees in lieu of consideration for construction and development. The statutory definition of "support services of business or commerce" covers outsourced services provided to a business recipient. The facts show no contract or privity between the concessionaire and the bus operators for provision of support services; the concessionaire was not engaged by bus operators to perform outsourced business functions but was permitted to collect fees as consideration from the Authority under a BOT-type concession. The impugned demand was limited to adda-fees and the concession agreement and surrounding scheme indicate the service, if any, was rendered to the Authority and the fees were in lieu of consideration for construction/investment. The Tribunal also considered guidance in Board circulars expanding the scope of business support services but found those do not convert the public infrastructure concession into outsourced business support services to individual bus operators.

Conclusion: The adda-fees are not taxable as "Business Support Service" under the Finance Act, 1994; the service tax demand on adda-fees is set aside in favour of the assessee.

Issue (ii): Whether the demand of service tax for October 2006 to September 2011 (SCN dated 11.04.2012) is barred by limitation.

Analysis: The concessionaire furnished all relevant information to the department on 06.04.2009 and complied with departmental directions thereafter. The statutory limitation period of one year would commence from 06.04.2009 and the department was required to issue notice by 05.04.2010. The SCN was issued on 11.04.2012, beyond the one-year period. The department did not produce evidence of suppression, fraud or wilful mis-statement to invoke extended limitation.

Conclusion: The service tax demand in appeal ST/55340/2013 (period October 2006 to September 2011) is time-barred and therefore not sustainable; conclusion is in favour of the assessee.

Final Conclusion: The impugned orders confirming service tax, interest and penalties on adda-fees under the category of business support services are set aside and all appeals are allowed with consequential relief as per law.

Ratio Decidendi: Service tax liability under the business support service category must be determined by reference to the contractual rights and obligations between provider and recipient; where a concessionaire collects user/parking charges under a BOT-type concession from an Authority and there is no privity of contract with individual users, such collections do not constitute outsourced "business support services" to those users, and limitation runs from disclosure of relevant information to the department unless suppression or fraud is shown.

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