1. The present appeals No. ST/87621/2013 and ST/89361/13 has been filed by Commissioner, Service Tax, Mumbai-II. The Appeal No. ST/87621/2013 is against Order-in-Original No. 14/ST-II/RS/2013 dated 27-2-2013 in case of Respondent M/s. MEP Toll Road Pvt. Ltd. and Appeal No. ST/89361/13 is against Order-in-Appeal No. 243/BPS/MUM/2013 dt. 29.06.2013 passed by Commissioner (Appeals) in case of Respondent M/s. Ideal Road Builders Pvt. Ltd. (IRBPL). Vide the impugned orders the demand of service tax against both the Respondents were dropped. The Brief facts of the case are that the respondents have purchase the right from M/s. National Highway Authority of India and/or from Maharashtra State Road Development Corporation (MSRDC) to collect the toll in auction in case of Respondent MEP, it was created by M/s. IRBPL as Special Purpose Vehicle (SPV) for the collection of Toll. M/s. MEP, M/s. IRBPL and M/s. MSRDC entered into tripartite agreement under which the SPV i.e. the Respondent agreed to pay a fix amount to MSRDC and collect the toll from the users of road/bridge. M/s. MEP were issued show cause notice dt. 23.10.2012 on the ground that as per the terms of the tripartite agreement signed between the MSRDC, M/s. IRBPL and Respondent, it is observed that the Respondent are authorized to collect toll by the MSRDC Ltd. on its behalf subject to fulfilling of the conditions therein. The Respondent's annual report for the period 2007-07 to 2011-12 declares its revenue as "income from toll collection". The Respondent have undertaken the services of collection of toll for the period mentioned in the contract on behalf of corporation for which they were, as per the contract terms, allowed to retain part of the toll collected as consideration for such service provided to the corporation which is a taxable service falling under the category of "Business Auxiliary Service" as defined in Section 65(105)(zzb) of the Finance Act, 1994 by collecting Toll on behalf of MSRDC. Accordingly proposed to demand service tax alongwith interests and penalty. The adjudicating authority set aside the demand and penalties proposed. Hence the present appeal. In case of Respondent M/s. Ideal Road Builders (IRBPL) they were also collecting toll from various collection point. Accordingly a show cause notice dt. 12.1.2010 was issued for the period
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1.4.2005 to 31.3.2007 to the Respondent demanding service tax under the category of "Business Auxiliary Services". On confirmation of service tax demand against Respondent they approached Commissioner (Appeals) who on merits as well as limitation set aside the demands. Hence the present appeal by the revenue.
1.1 Shri M.P. Damle, Ld. Assistant Commissioner (A.R.) appearing on behalf of the Revenue submitted that the issue of levy of service tax is not on toll collection but the services provided by the Respondent to M/s. IRBPL/MSRDC or NHAI. The Government of India has authorized NHAI and the Govt. of Maharashtra has authorized the MSRDC to collect the toll. Thereafter these agencies have in turn auctioned the right to collect the toll further. In case of NHAI the rights has been purchased directly by Respondent and in case of MSRDC the rights have been transferred to Respondent by M/s. IRBPL in terms of Tripartite agreement. In both the cases the Respondent is not part of any SPV under Public Private Partnership (PPP) model or Build Own/Operate (BOT) Models. In both the case the Respondent has got nothing to do with the constructions of the road or building or bridges and hence was not entitled to collect the toll. The toll was initially to be collected by NHAI or MSRDC. IN the instant case the right to collect toll was transferred to Respondent on payment of consideration mutually agreed between the parties. In other words the Respondent is collecting toll as agent of NHAI/MSRDC and collecting the consideration that was equivalent to the total amount collected by them representing toll minus the amount agreed by them to be paid to NHAI/MSRDC. Thus the ingredients of services as defined under "business auxiliary service" are satisfied. He also relies upon Circular dt. 22.2.2012 that as per Para 3 of the Circular the service tax is levied on amount retained by the independent entity engaged by the SPV to collect the toll from users under the category of business auxiliary service. Since the Respondent is an independent entity engaged by the NHAI/MSRDC to collect the toll, as per the clarification, the service tax is payable. He also submits that the decision of Tribunal in case of Intertoll India Consultants (P.) Ltd. v. CCE  32 STT 269 : 12 taxmann.com 296 (New Delhi - CESTAT) relied upon by the Commissioner has not been accepted and has been appealed against before the Hon'ble Supreme Court. That the decision of the Tribunal in case of Ideal Road Builder (P.) Ltd. v. CST  42 GST 226 : 32 taxmann.com 354 (Mum. - CESTAT) is distinguishable as the agreement was between the State Authority and concessionaire was for the construction of road and the contractor was authorized to collect the toll. Since the entire activity was in the form of BOT agreement no service tax was payable which is exactly as per para 4 of the Circular dt. 22.2.2012. That the observation of the Chief Commissioner, Mumbai-II that the issue is squarely covered by the observation of the tribunal in para 4 in case of CST v. Ideal Road Builders (P.) Ltd. [Order No. A/89944-89946/17/STB, dated 26-9-2017] appears to be well founded. He prays for setting aside the impugned order. Similar arguments has been made in respect of Respondent M/s. IRBPL.
2. Shri. A.R. Krishanan, Ld. Counsel appearing on behalf of the Respondents submitted that the Respondents are not liable for payment of service tax. He submitted that the Respondents has secured rights to collect toll for different sections of Highways on the basis of competitive bids from National Highway Authority of India (NHAI) and Maharashtra State Road Development Corporation (MSRDC) for an upfront lump sum bid price. The Respondent has to pay fixed bid price for "toll collection rights" to NHAI/MSRDC irrespective of the toll amount collected. Thus there could be profit or loss on collection of toll. This shows that the toll was collected on its own account and belonged to the Respondent. The toll is not collected by the Respondent as agent of NHAI/MSRDC. Hence no service is provided to NHAI/MSRDC. The toll is collected on own account for conducting business of toll collection. The risk of collection is on own account. They are liable to pay bid price to NHAI/MSRDC. If they were to be considered as agent of MSRDC/NHAI in that case the entire amount of toll would have to be paid to the NHAI/MSRDC and they would have got a fee/commission which is not so in the present case. No consideration is flowing from the NHAI/MSRDC to them. The toll collection rights were purchased in auction and no service is provided to NHAI/MSRDC. The difference between the toll collected and the amount paid to the NHAI/MSRDC cannot be treated as consideration for any service. The activity of NHAI/MSRDC to develop, maintain and manage the National Highways being a Statutory function cannot be considered as "Business activity" and therefore the alleged service provided by Respondent cannot be termed as auxiliary to business. Hence the same is not 'Business Auxiliary Service'. He relied upon the following judgments:
(i) PNC Construction Co. Ltd. v. CCE  28 taxmann.com 182 :  39 STT 880 (New Delhi - CESTAT)
(ii) Patel Infrastructure (P.) Ltd. v. CCE :  37 STT 440 : 26 taxmann.com 297 (Ahd.)
(iii) Prakash Asphalting & Toll Highways India Ltd. v. CCE [Final Order No. ST/53613/2016, dated 14-9-2016]
(iv) CST v. Intertoll ICS CE Cons O & MP Ltd. [Final Order No. ST/A/34/2012-CUS (PB), dated 23-12-2011]
(v) Shri Jivanlal Joitram Patel v. CCE & ST [Order No. A/10013/2016, dated 6-1-2016]
(vi) Ideal Road Builders (P.) Ltd. v. CST [Final Order No. A/1923/2015-WzB/STB, dated 1-7-2016]
(vii) Intertoll India Consultants (P.) Ltd. (supra)
He submits that the demand in SCN has been raised without specifying the precise clause of "Business Auxiliary Service" based on which the service tax is demanded. He quotes clauses (i) to (vii) of the definition of 'Business Auxiliary Service' and submits that none of the clause is applicable in the present case. He also submits that the Appellant has placed reliance on Para 3 of the Board Circular dt. 22.02.2012 which is as under:
"3. However, if the SPV engages an independent entity to collect toll from users on its behalf and a part of toll collection is retained by that independent entity as commission or is compensated in any other manner, service tax liability arises on such commission or charges, under the Business Auxiliary Service section 65(105)(zzb) read with section 65(19) of the Finance Act, 1994."
He submits that the reliance on aforesaid Para is wrong as the same is not applicable in the instant case. They do not collect toll on behalf of NHAI/MSRDC as explained in above Para. The toll retained by them is profit on their own account and there can be loss also. The toll collected and retained is not in the nature of fee or commission or compensation from NHAI/MSRDC. He submits that as may be seen from the documents even the NHAI/MSRDC considers activity of Respondent as toll collection and hence the reliance on Para 3 of the said circular is not correct. That as per dictionary meaning a toll is a tax. He relies upon judgment of Hon'ble Supreme Court in case of CCE v. Kisan Sahkari Chinni Mills Ltd : 2001 (132) ELT 532. He also relies upon Mumbai High Court judgment in case of Sameer Surendra Desai v. State of Maharashtra : AIR 2004 BOM 328 wherein the toll was referred as tax. He also relies upon the order of Tribunal in case of Intertoll India Consultants (P) Ltd. (supra) herein it was held that toll collection are exempt under Notification No. 13/2004-ST. That toll is in the nature of tax and the same is exempted in terms of Notification No. 13/2004-ST dt. 10.9.2004. It exempts taxable service in collection of any duties or taxes levied by the Govt. The fee collected under Section 7 of NH Act, 1956 and the tolls collected under section 20 of the Bombay Vehicles Act, 1958 are compulsory extraction/levy and hence fall within the expression 'duties or taxes' as envisaged in above Notification. He submitted that the difference between the toll collected and the amount paid to NHAI/MSRDC cannot be treated as consideration for any service and the same is incorrect and illegal. That no reason has been given as to why such difference shall be considered as taxable value of services. That if difference is considered in that case in respect of financial year 2011-12 an amount of Rs. 571.52 crore was paid to NHAI/MSRDC whereas in SCN it was shown as Nil. It shows that the demand is absolutely without any basis. He also submits that the valuation method has not been prescribed by the law and even prescribed would not have been applicable as there is no method. That if yearwise difference is considered in many cases there is negative value and in one year it is Nil. That in case where entire bid money is paid upfront at a discounted at a discounted price there would be no further amount payable to NHAI/MSRDC and the method adopted would fail. That if valuation method fails the levy of tax is also not sustainable. He relies upon the judgment of Hon'ble Supreme Court in case of CIT v. B.C. Srinivasa Shetty :  128 ITR 294 : 5 Taxman 1 (SC) to support his claim. He also submitted that toll collection activity has been treated as Business by NHAI/MSRDC and the money flowing to NHAI/MSRDC as bid price. Nowhere their activity has been treated as on commission. Without prejudice to his submission on merits, he also submits that the demands are time bar as the nonpayment of service tax on such transactions has been known to the department and various judgments has been passed in the favour of parties. That the demand of only Rs. 10,30,41,783 computed after reducing the overstated amount is only within the normal period of limitation. Also since the issue involved is not of suppression but of interpretation, therefore no penalty is imposable against the Respondent. In case of Respondent M/s. IRBPL similar arguments has been advanced. It is submitted that they have not represented MSRDC or acted as agent of MSRDC to collect toll. They have acquired right to collect toll in auction for an upfront lump sum payment and hence the same cannot be considered as service. Apart from merits they also pleaded that the revenue has not challenged the Order-in-Appeal on the grounds of limitation of time. Hence the Appellant-Revenue's appeal also fails on limitation/time barred demand. They relied upon decisions in case of CCE & CUS. v. Aunde Faze Three Auto Fab 2009 (246) ELT 324 (Tri. - Ahmd.) and CCE v. Meco Tronics (P.) Ltd : 2003 (159) ELT 628 (Tri. - Chennai). That there is nothing on record to show that they had any mala fide intention to evade taxes and hence demand is not sustainable. Further two previous SCN dt. 10.04.2007 for the period 01.07.2003 to 31.01.2007 and SCN dt. 15.01.2010 for the period 01.01.2006 to 28.02.2007 was issued, but the present SCN dt. 22.10.2010 for the period 01.04.2005 to 31.03.2007 is clearly time barred. The SCN having been issued beyond the normal period of one year as the department was already aware of the activities of the Respondent, the extended period cannot be invoked. Reliance is placed upon the decisions in case of Nizam Sugar Factory v. CCE [Appeal No. 2747 of 2001, dated 20-4-2006], ECE Industries Ltd. v. CCE : 2004 (164) ELT 236 (SC) and Hyderabad Polymers (P.) Ltd. v. CCE : 2004 (166) ELT 151 (SC).
3. We have carefully considered the submission of both the sides as well as relevant records and case laws cited by the rivals. We find that in the present case the Respondents has secured the right to toll collection in auction. The Respondents being the suitable bidder were given right to collect the toll and under the terms and conditions of such auction the Respondents were liable to pay the bid amount to NHAI/MSRDC. Such bid price which the Respondents were liable to pay to the NHAI/MSRDC was in no way connected with the collection of toll or quantum of toll amount. The Respondents had to pay NHAI/MSRDC the bid amount irrespective of the fact whether such activity would earn him profit or loss. The NHAI/MSRDC were in no way concerned with the collection made by the Respondents. As a result of same we find that though in case of Respondent M/s. MEP income from toll collection was in negative during the years 2007-08, 2008-09 and 2011-12 but they had to pay the bid amount to NHAI/MSRDC. This leaves no doubt in our mind that the activity of toll collection by the Respondents was not on behalf of NHAI/MSRDC but on their own account once they had secured the right to collect the toll. We also find that the activity of NHAI/MSRDC is of developing, maintaining and management of national state highways which is a statutory function. They have not been engaged in the said activity as business. In such case it cannot be said the Respondents has been providing auxiliary service to any business. The Business Auxiliary Services has been defined under Finance Act, 1994 as under:
'(19) "business auxiliary service" means any service in relation to,--
(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or
(ii) promotion or marketing of service provided by the client; or
(iii) any customer care service provided on behalf of the client; or
(iv) procurement of goods or services, which are inputs for the client; or
Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client;
(v) production or processing of goods for, or on behalf of, the client;
(vi) provision of service on behalf of the client; or
(vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision,
and includes services as a commission agent, but does not include any information technology service and any activity that amounts to manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 (1 of 1944).
Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause,-
(a) "commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person-
(i) deals with goods or services or documents of title to such goods or services; or
(ii) collects payment of sale price of such goods or services; or
(iii) guarantees for collection or payment for such goods or services; or
(iv) undertakes any activities relating to such sale or purchase of such goods or services;
(b) "information technology service" means any service in relation to designing, developing or maintaining of computer software, or computerized data processing or system networking, or any other service primarily in relation to operation of computer systems."'
3.1 We find that NHAI/MSRDC engaged in sovereign function and not into any business activity. It has been held in catena of judgments of Tribunal as cited above by the Respondents that NHAI/MSRDC is not into business activity. For this reason the Respondents cannot be said to be engaged in rendering business auxiliary services to any person. In case Intertoll ICS SE CONS O & MP Ltd. (supra), the Tribunal held as under:--
"6. On merits of the matter, we find that National Highway Authority of India has availed services of the respondents. Fundamentally, the said National Highway Authority of India (NHAI) is not established by Revenue to be business concern nor a commercial concern not being engaged in any business activity. Therefore providing business auxiliary services by respondents to such NHAI is inconceivable. Therefore, for such reason, we dismiss the appeal of the Revenue without approving reasons given by the adjudicating authority."
In another case of Swarna Tollway (P.) Ltd. v. CCE :  32 STT 162 : 12 taxmann.com 48 (Bang. - CESTAT), the Tribunal while allowing the appeal of the Assessee held that--
"National Highway Authority of India cannot be treated as the customers of the said Appellant. It also observed that the NHAI is not running any business. In such view of the Tribunal we are unable to appreciate that the Respondent is rendering any 'Business Auxiliary Service'. Thus we are in agreement with the judgments cited supra by the Respondent and hold that the Respondent is not rendering any business auxiliary service."
3.2 We also find that the Respondent's case is not even concerned with charging commission from NHAI or MSRDC unlike the judgments cited above. They stand on better footing than the cases cited by the Counsel for the Respondents as in the present case they had secured the right to collect the toll from NHAI/MSRDC in a bid for lump sum amount. This amount is to be paid to NHAI/MSRDC irrespective of any quantum of toll collection. The toll collection is not being done on commission basis or in lieu of any remuneration. All the proceeds of the toll collection belong to the Respondents with no interference or right of NHAI/MSRDC. The income so generated is their own business income and NHAI/MSRDC has no right over such toll collection. The toll is not collected by the Respondents as representative or agent of NHAI/MSRDC nor any commission in terms of quantum of amount or percentage is charged by the Respondents from NHAI/MSRDC. They are liable only to pay the bid amount instalment to NHAI/MSRDC irrespective of any collection which can in no way be said to be commission income. They have purchased the right to collect the toll in auction which in no way can be termed as rendering of service to NHAI or MSRDC. Rather the Respondents in terms of the agreement are liable to pay the amount fixed at auction to the NHAI/MSRDC irrespective of the fact that such collection of Toll is profitable to them or not. This leaves no doubt that for the above reason also the toll collection by the Respondents is not arising from any "Business Auxiliary Service". We further find that even M/s. NHAI and MSRDC do not consider the toll collection by the Respondents on their behalf as commission agent. They consider the Respondents as in business of toll collection and even tax is collected at source u/s. 206C of the Income-tax Act from the instalments paid by the Respondents. The said section is in respect of collection of tax of income tax at the time of receipt of amount. The Respondents income is towards its own toll collection and they do not get any commission on account of collection of toll from NHAI/MSRDC. There is no deduction of tax at source under section 194H which is towards collection of tax on commission income. Thus the difference between the toll collection and the bid amount paid by the Respondents to M/s. NHAI/MSRDC in no way can be termed as consideration for any service. The reliance placed by the revenue upon Board Circular No. 152/3/2012-ST dt. 22.02.2012 is not correct for the reason that the Respondents has not collected such toll charges on commission or charges on behalf of NHAI/MSRDC. The toll collection is their own income and is not parted with NHAI/MSRDC as they are concerned only with the bid amount finalized in auction and therefore cannot be termed as activity of Business Auxiliary Service. In view of above findings and judgments cited by the Respondents we hold that the activity of the Respondent cannot be considered as "Business Auxiliary Service" and cannot be taxed to service tax. Thus the appeals filed by the revenue is not sustainable on merits and accordingly dismissed. Since we have held that the demand is not sustainable on merit, we therefore are not inclined to go into the other submissions made by the Respondent M/s. MEP. In case of M/s. IRBPL we find that the demand apart on merits was also set aside by the Commissioner (Appeals) on time bar/limitation which has not been challenged by the revenue in its appeal. We also find that the demands are time barred as the show cause notices for the later period were issued earlier which clearly shows that the revenue was in knowledge of the facts. We thus hold that the demands are not sustainable on being time barred and the impugned order has been rightly set aside the demand on time bar also in case of M/s. IRBPL.
In view of reasons given herein above, the appeals filed by the revenue are dismissed. Cross objection also stands disposed of