TaxTMI 
TaxTMI 
TaxTMI 
2020 (7) TMI 356
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....idge and maintain it. They were allowed to collect a fee till the recovery of investment is made after which they were supposed to hand it over to the Government of Andhra Pradesh. The estimated total cost of the project was Rs. 110 crores, of which the Government of Andhra Pradesh gave them a subsidy of Rs. 69 crores while the rest of the investment had to be made by the appellant. The appellant was entitled to collect a fee on the motor vehicles and users of the bridge during the concessionaire period of 15 years. The salient features of this agreement were as follows: a. M/s NEC is permitted to levy fee (toll) for a concession period of 15 years during which period they are also liable for maintaining the facility. b. The fee to be collected by M/s NEC is to be retained by them as a nominee of GOAP during the concession period. c. M/s NEC should not attempt to assign the project to others. d. M/s NEC is permitted to develop way-side facilities like advertisements, hoardings etc., to generate revenue during the BOT period. e. The land along with the properties and fee booths etc., so developed by M/s NEC to be handed over to GOAP after the expiry of BOT period. f. The....
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....50,00,000/- being the service tax payable on the franchise service rendered to GTBPL should not be demanded from them under section 73(1) of the Finance Act, 1994 read with the proviso contained therein; iii. An amount of Rs. 25,00,000/- being the Education Cess payable franchise service rendered to GTBPL should not be demanded from them under section 73(1) of the Finance Act, 1994 read with the proviso contained therein; iv. Interest should not be demanded from them under section 75 of the Finance Act, 1994; and v. Penalty should not be imposed on them under section 76, 77 & 78 of the Finance Act, 1994. 6. The appellant contested the demand on merits as well as on limitation. After following due process, the learned Commissioner by the impugned order held that service provided by the appellant to GTBPL is a franchise service in terms of section 65(105)(zze) of the Finance Act, 1994. Accordingly, she confirmed the demand of service tax amounting to Rs. 12,50,00,000/- under the proviso to section 73(1) of the Finance Act, 1994. She also confirmed the demand of Education Cess of Rs. 25 lakhs along with interest under section 75 of the Finance Act, 1994. Further she imposed a p....
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....BPL for rendering any service which is identified by them. g) The consideration received for construction of bridges is exempted from the service tax under the taxable category of works contract and the same cannot be taxed under a different head. h) The value of the taxable service received otherwise than by way of money is not taxable prior to 18.04.2006. i) Without prejudice to contest the case on merits, the value of service should be taken as cum-tax value. j) The demand is time barred and there is no evidence of fraud, collusion, wilful misstatement or suppression of facts or contravention of the Act or Rules with intent to evade payment of service tax. k) There was a bonafide belief that no service tax is payable under franchise service. It involves interpretation of the law and therefore, extended period of limitation cannot be invoked. l) No interest is payable as demand itself is not sustainable. m) No penalties are imposable as it is question of bonafide belief in interpretation of law. 8. Learned counsel for the appellant reiterated the above submissions and vehemently argued that they have transferred their right to collection of toll to their own subsid....
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.... June, 2008 onwards by GTBPL in the name of the appellant until the investigations were initiated and thereafter, in their own name. 12. He would submit that the department's case is that appellant has given representational right to GTBPL in respect of Y-Y bridged concessionaire agreement which amounts to franchise service. The extended period of limitation has been correctly invoked as the fact that the rights have been transferred to GTBPL was not disclosed to the department at any stage. In fact, these were internal Board resolutions of the two companies i.e., the appellant and the GTBPL. The appellant are registrants of Service Tax and have been filing returns. At no point of time, have they disclosed these facts to the department, hence, they cannot plead bonafide belief. 13. As per clause (3) of agreement between the appellant and the Government of Andhra Pradesh, the appellant was permitted to assign its rights only to banks or financial institutions for financing the project and not to any other person or entity. Hence, any assignment of representational rights would require fresh agreement and no such agreement was produced. It is evident that appellant had done this as....
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.... service tax. They were fully aware of the obligations under self assessment scheme. The agreement which they entered with GTBPL was a private arrangement which was not disclosed to the department. There was no precedent decision which could have lead them to believe that no service tax was payable in their case. There is nothing on record to show that the appellant had obtained any legal opinion or sought any clarifications from the department which could have lead them to believe that they are exempted from service tax. The argument that they sold their rights to GTBPL is not correct because it could not have done so under the contract with the Government of Andhra Pradesh. The purported change in the toll fee receipts after investigations have commenced is also indicative of their effort to suppress the fact of their intent to evade payment of tax. In view of the above, the appellant's appeal has no merits and the demand needs to be confirmed along with interest and penalties imposed also need to be upheld. 22. We have considered the arguments on both sides and perused the records. Construction of roads and bridges is done by the Government either directly or sometimes it is do....
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....ties under the agreement to them in exchange for an amount received in the form of taking over debt and assigning some shares. The value of both these debt and the shares has been quantified and is specifically included in the arrangement between appellant and their subsidiary, M/s GTBPL. Thus, the amount received as consideration for assigning these rights and responsibilities is evident. 25. There is nothing on record to show that the Government of Andhra Pradesh has modified any of the terms of the agreement so as to permit such assignment to third party. Evidently, this has been done behind the back of the Government of Andhra Pradesh. The DGM of the appellant firm had, in a statement, indicated that they have informed the Government of Andhra Pradesh but there is nothing on record to show that this assignment has been approved by the Government of Andhra Pradesh or the agreement has been modified. Thus, the arrangement between the appellant and GTBPL was not disclosed to the Government of Andhra Pradesh. It was also not disclosed to the Revenue in this case to enable them to examine the arrangement from the service tax point of view. In fact, it was done through a Board resol....
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....rce in this argument. In a franchise agreement, the franchisor and franchisee can have any convenient method of financial arrangement. What is important is the service must be provided and the franchisor must allow franchisee to provide that service and collect the amounts. The franchisor and franchisee can have an arrangement where a portion of amount is paid to the franchisor on every transaction or they could have an arrangement of lump sum payment or any combination of two or any other suitable arrangement. In this case, the entire amount has been paid upfront in one go by the franchisee, GTBPL, to the appellant. Therefore, the entire toll fee is being retained by the franchisee, GTBPL. 29. It has also been argued by the learned counsel for the appellant that the amount was not paid in money. We do not find much force in this argument as the amount was indeed paid in terms of money. It is not necessary for the amount to be paid in cash whether prior to 2006 or thereafter. The money could be paid in the form of cash, cheques, drafts or any other acceptable form. What is important is that the amount must be paid and that amount must be a consideration for the service rendered. I....