TaxTMI 
TaxTMI 
2026 (6) TMI 113
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.... service" for the period prior to 01.07.2012 and as taxable service, not covered under the negative list for the subsequent period. 3. Aggrieved by the impugned orders, the appellant has filed the present appeals. 4. Learned Counsel for the appellant submitted that appellant is a statutory authority constituted under the National Highways Authority of India Act, 1988 (NHAI Act) and functions as an executing agency of the Central Government. The user fee (Toll) is a statutory levy under Section 7 of the National Highways Authority of India Act, 1956 and NHAI merely facilitates its collection. 5. Learned Counsel for the appellant submitted that the contractors do not receive any representational right, hence, the transaction cannot be classified as "franchise service". It is further submitted that there is no service provider and service recipient relationship between appellants and the contractor. 6. Learned Counsel for the appellant submitted that the activity falls within the ambit of Section 66D(h) of the Finance Act, 1994 (negative list) being related to access to roads. Therefore, activity undertaken by the appellants falls under negative list of services, and hence....
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.... the period from 01.07.2012 to 31.03.2016, the transaction falls under clause (a) of the Section 66D of the Finance Act that a service by the Government and not liable to Service Tax as being covered by negative list. 11. Learned Counsel for the appellant additionally submitted that for the period from 01.04.2016 to 30.06.2017, since, sub-clause (iv) of Section 66 (a) was amended to include any services provided to a business entity by replacing the expression "support service, it is possible that exclusion from negative list is attracted." However, even for the said circumstances, there is no tax liability/levy on the appellant or the Government, in view of the charge operating on reverse charge basis as per Section 68(2) of the Finance Act read with Notification N0.30/2012-ST dated 20.06.2012. Therefore, service provided by the Government are covered and exclusion therein does not include sub-clause (iv) of Section 66 D(a) and Service Tax liability would be on the service provider i.e. contractor. Therefore, for the period from 01.04.2016 to 30.06.2017, even if the levy operates, the charge does not fall on the appellant or the Government, but it falls on the recipient /contra....
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....e service of "Transfer of user fee rights" to the contractors rendered by NHAI. The collection of Service Tax on consideration so received by NHAI is not unconstitutional. For prior to 01.07.2012, the service rendered by NHAI is covered under 'franchise service' and after 01.07.2012 under taxable service. It is also submitted that the service. "Transfer of user fee rights" to the contractors rendered by NHAI is not, per se, a collection of tolls for providing access to a road or bridge. Such service is in relation to collection of tolls and would be in the nature of service used for providing such service and would not be covered under negative list. Hence, Section 66D(h) does not exclude Service Tax on aforesaid "Transfer of user fee rights" service. Learned AR further submitted that as per the contract, the agreed amount shall be paid by the highest bidder, to whom the rights for collection of user fee were given by the appellant, on weekly basis irrespective of vehicle traffic. When no vehicle passed through the toll gate, the contractor may not be able to collect any toll. However, as per contract, contractor is under obligation to pay the agreed remittances on weekly basis and....
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....ntentions raised by the parties, we consider it necessary to refer to the 'contract', between appellant and contractor and the relevant paras, of which is reproduced below as under: "(G) AND WHEREAS the authority is empowered under the provisions of the 1988 Act to enter into contracts with any person for the purpose of collection of USER Fee under the National Highways (Fee for the use of National Highways section and permanent Bridge - Public Funded Project) Rules, 1997. The Authority is desirous of engaging the contractor to collect User Fee only at Krishnavaram toll plaza located at Km. 865.553 for the Rajamundary - Tuni section from Km. 830.525 to Km. 914.883, of National Highway No.5. (H) AND WHEREAS the Authority invited bids from interested entrepreneurs for collection of USER Fee for the use of the said Section of National Highway/the said bridge for a period of one year User Fee. The Contractor is one of those bidders who submitted bid and quoted in its offer that, in lieu of transferring Central Government's User Fee collection rights for the said Section of the National Highway or the said bridge for aforementioned period, the Contractor shall remit th....
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.... possesses essential characteristics of a commercial service arrangement and is distinct from the statutory levy i.e. Toll collected from road users. 22. Section 65 (47) of the Finance Act, 1994 defined "franchise service" as an agreement whereby, representational rights to sell or provide services are granted for consideration. NHAI granted contractors the representational right to collect toll in its name. Without such authorization, contractors had no legal authority to collect toll. Appellant has received a lump sum amount as consideration for the said transfer of right, which is payable irrespective of the use of this facility. In the case of Navayuga Engineering Co. Ltd., supra, where the facts were very similar, the bench Hyderabad has held that the services rendered by NEPL to the contractors were in the nature of "franchise service". Accordingly, the activity squarely falls within the ambit of "franchise service". Section 65(47) of the Finance Act, 1994 defined the franchise as thus: "(47) "franchise" means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identifie....
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....reign functions cannot be delegated. Commercial exploitation of toll collection rights does not fall within that category. In the case of Larson & Toubro Ltd., supra, Tribunal Ahmedabad, clarified that the tax is on compensation received for granting the right to collect toll and not on toll itself. The relevant para of the decisions as follows: "4.1 The Service Tax in the instant case has been demanded, not on the amount of toll collected, but on the compensation received by the appellant with respect to collection of such toll. While the toll may be a tax, the compensation received by the appellant is not a tax. The compensation received by the appellant is for the service provided by the appellant to AMTRL in respect of collection of toll and other assorted services. There is no exemption to any service provided in respect of collection of tax, and therefore, first argument of the Ld. Counsel cannot be sustained." 26. In Navayuga Engineering Co. Ltd., supra, this bench held that when right to collect toll has been assigned to a contractor, the payments received for transferring the rights are taxable. The relevant para of the judgment as thus: "26. In this c....
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....isee 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." 27. Judicial discipline requires following aforesaid decisions, particularly when one of them emanates from this bench on identical facts. 28. Learned Counsel for the appellant relied on the decision, in the case of Ideal Road Builders Pvt Ltd., Vs Commissioner of Service Tax, Mumbai [2013 (31) S.T.R. 350 (Tri-Mumbai)] Collection of toll charges from road user is not taxable. It is not applicable in the present case factual matrix, although this case has been decided by the Tribunal on basis of Board circular dated 22.02.2012, which is reproduced below: "The Board Circular dated 22.2.2012 is reproduced below:- "A representation has been received by the Board, seeking clarification regard....