2026 (2) TMI 236 - AT - Service Tax

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 ... Support services of business or commerce - taxable as 'Business Support Service' under Sections 65(104c) and 65(105)(zzzq) of the Finance Act, 1994 - contract based levy - concession agreement / Build Operate and Transfer - extended period of limitation - renting of immovable property services - Renting of immovable property services (exemption) - HELD THAT:- Appellant had entered into an agreement with PIDB vide which the Appellant was allowed to raise construction of bus-terminal at Amritsar and charge adda-fees as mentioned in Schedule-II. We find that it is an admitted fact that the Appellant had a contract with State of Punjab and liability to service tax has to be determined based on the contract with State of Punjab; there exists no contract with the bus operators for providing any services; further, at the time of entering into contract with State of Punjab, the Appellant could not have agreed to provide support services to unknown bus operators; further, the entire bus-terminal constructed by the Appellant could not have been constructed to support the business of the bus operators, in fact, bus-terminals are created as a public utility service and not as support services for bus operators and hence, the service tax is not leviable under the business support services. It is pertinent to note that Schedule-X to agreement is “project site lease deed” by which the Appellant is being granted leasehold rights in the project site i.e. land, on which bus-terminal is required to be developed and in consideration, the Appellant is required to pay lease rental of Rs.50,000/- per month to PIDB for the concession period. The agreement between the Appellant and PIDB proves that the services provided, if at all, are to be PIDB and not to be users of the bus-terminal. In the present case, instead of paying the costs of construction of new bus-terminal, the Appellant was allowed to collect adda-fees mentioned in Schedule-II and other charges mentioned in Schedule-III; the concession agreement was governed by PIDR Act and adda-fee was fixed by the State Government; and the Appellant had no choice but to collect adda-fee as the prescribed rate. Therefore, in view of completely different contractual terms in the present case and in the case of Prem Kumar Maini [2024 (10) TMI 11 - CESTAT CHANDIGARH], the decision of the Tribunal in the said case is distinguishable on the facts and is not applicable in the facts of the present case. As regards the invocation of extended period of limitation, we find that in the present case, the Appellant, for the first time, had submitted all the relevant information to the department on 06.04.2009 and had obeyed all the directions of the department i.e. appeared before the department, submitted the information as required, therefore, the limitation of one year would start from 06.04.2009 and the department should have issued the SCN on or before 05.04.2010 whereas the SCN was issued on 11.04.2012, which is beyond the period of one year as prescribed by law. Further, we also find that the department has not been able to bring any evidence regarding the suppression, fraud, mis-statement etc on the part of the Appellant with intent to evade payment of tax, therefore, substantial demand in the first appeal (ST/55340/2013) is barred by limitation. Thus, we hold that the demand of service tax on adda-fees in the present case under the category of ‘business support services’ is not sustainable in law and is liable to be set aside. In result, impugned orders are set aside and all the appeals of the Appellant are allowed with consequential relief, if any, as per law. 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.