Case Law Details
Mateshwari Indrani Contractors Pvt Ltd Vs C.C.E. & S.T. (CESTAT Delhi)
Service Tax under the category of ‘Business Auxiliary Service’ would become liable only if the service is rendered in relation to the business of the recipient. In the present case, the appellant, as a contractor, has engaged in collecting statutory levies on behalf of the Government department (CTD)/ statutory authority (NHAI) neither of whom are engaged in business. Secondly, we are of the view that the levy of Service Tax cannot be sustained on the Commission retained by the appellant.
In respect of the activity of toll collection, it is also fairly well settled that no Service Tax can be levied on such an activity as held by the Tribunal in the case of Commissioner v/s Intertoll ICS (supra) in which the Tribunal observed 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.”
On the activity of collection of commercial taxes, for CTD we are of the view that the appellant will also be entitled to the benefit to exemption under Notification No. 13/2004-ST dated 10/09/2004 which specifically exempts the services provided by any person to the Government of State in relation to collection of any duties or taxes levied by the Government from the whole of the Service Tax leviable thereon.
FULL TEXT OF THE CESTAT JUDGMENT
1. The present appeal challenges the Order-in-Original No. 63/2013- 14 dated 02/09/2013 and covers the period of dispute April, 2007 to March, 2012. The appellant is engaged as a contractor on behalf of the Government Departments to collect sales tax, royalty and toll tax. The appellant participated in the bids floated by National Highways Authorities of India (NHAI); Department of Mines and Geology (DMG); and Commercial Tax Department, Rajasthan State (CTD). For NHAI, the appellant worked as a contractor in the collection of toll tax. For DMG, likewise, they were contractors for collection of royalty on mines. In respect of Commercial Tax Department, they were the contractor to whom the task of collection of commercial tax was outsourced. The appellant successfully participated in the bid invited by the above agencies and was awarded the right to collect toll/ royalty/ commercial tax. For the grant of such right, the appellant agreed to pay the bid amount in lump sum. In exercise of the Right so acquired, the appellant collected the toll/royalty/ commercial taxes from the users of highway/ quarry license holders/ assessee who is liable to pay VAT. The amount payable to NHAI/DMG/CTD for grant of such right was firm and any loss/ profit arising out of such collection was to the account of the appellant. Revenue was of the view that in cases where the actual collection was more than the amount paid to the authorities, the difference is in the form of the commission received by the appellant. Considering the appellant to be a ‘Commission Agent’, Revenue was of the view that Service Tax is liable to be paid on such commission under the category of Business Auxiliary Service (BAS) as defined under Section 65 (19) of the Finance Act, 1994. On the above lines show cause notice dated 16/10/2012 was issued to the appellant and after the due process of adjudication, Service Tax demand amounting to Rs. 1,33,58,700/- was slapped along with interest and equal penalty. Aggrieved by the said demand the present appeal stands filed.
2. With the above background, we heard Shri B.L. Narsimhan, Ld. Advocate for the appellant as well as Shri Sanjay Jain, Ld. DR for the Revenue.
3. The arguments advanced by the Ld. Advocate are summarized below:-
i. The Ld. Advocate challenged the view entertained by the lower Authorities that the appellant falls within the definition of ‘Commission Agent’ as per Section 65 (19), Explanation (a). After winning the bid from NHAI/DMG/CTD, the Ld. Advocate submitted that the amounts were collected by the appellant in their own right. Further, he submitted that for the levy of Service Tax under BAS, the alleged activities must pertain to the business of service recipient. In the instant case the activities are carried out for Government Department/ statutory authorities which cannot be said to be carrying out any business.
ii. He placed reliance on a series of decisions in which toll collection has been held to be not liable to payment of Service Tax. Some of the decisions are listed below:-
a. Intertoll Indi Consultants (P) Ltd v. Commissioner, 2011 (24) STR 611 (Tri-Del)
b.Commissioner v. Intertoll ICS CE Conso & MP Limited, 2013 (31) STR 477 (Tri-Del)
c. Sukhmani Society for Citizen Services v. Commissioner, 2017 (47) STR 172 (Tri-Chan)
d. Commissioner v. Ideal Road Builders Private Ltd, 2017-TIOL-3923-CESTAT-MUM
iii. The Ld. Advocate also submitted that the appellant will be entitled to the exemption under Notification No. 13/2004-ST dated 10/09/2004 which has exempted services provided by any person to the Government of a State in relation to collection of any duties or taxes levied by the Government from the whole of the Service Tax. He argued that the toll/ royalty/ commercial tax have been collected on behalf of Government and hence the same enjoys exemption under the above notification.
4. The Ld. DR justified the impugned order. He emphasized the observations of the Adjudicating Authority in para 20.02 and 20.03 of the impugned order in which he has concluded that the appellant is liable to be considered as a ‘Commission Agent’.
5. We have heard both sides and perused the record.
6. The appellant, during the period under dispute, have acted as a contractor for NHAI/DMG/CTD and has participated in the activity of collecting the statutory dues. As per the procedure adopted by the statutory agencies, a successful bidder of the tender process (such as the appellant) is required to make up front payment of the agreed amount so as to acquire the right to collect such statutory levies. The actual collection could be less or more than the amount paid to the authorities in lump sum. Revenue has taken the view that the appellant has performed such activity as a ‘Commission Agent’. The definition of the term ‘Commission Agent’ appears in Explanation (a) in Section 65 (19) of the Act and the same is reproduced below:-
“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;”
The Commissioner has taken the view that the appellant will be covered within the above definition since they are providing the service of collection of tax even if it may not be a taxable service. He is of the view that such services have been provided to the Government agencies. But before jumping to the conclusion that the appellant falls within the above category, it is necessary to examine whether the recipient of the service is engaged in business or commerce so as to be covered by ‘Business Auxiliary Service’. Such a view has been expressed by the Tribunal in the case of Sukhmani Society in Citizen Services (Supra) where the Tribunal has observed:-
“7 .For rendering Business Auxiliary Service, there will be three persons e.g. A, B and C. If B provides the service to C on behalf of the A, then B is said to render business auxiliary service. The consideration for the services would be paid by A to B. The view taken by the Revenue is that A is the Government, B is the appellant and C is the public. The consideration is taken as the amount collected as „facilitation charges‟. The appellant has taken the argument that to levy service tax under the Business Auxiliary Service the service provided by a service provider has to be in relation to the business of the service recipient. In other words, service provided by any person to a client in relation to Business Auxiliary Service is required to be in relation to business or commerce of the service recipient. We find this argument to be very persuasive. We find that the appellant has provided facilitization services to various departments. Hence, taxability under the category would arisen only if the Govt. department is engaged in business or commerce and services provided by the appellant are auxiliary to their business.”
As held by the Tribunal above, Service Tax under the category of ‘Business Auxiliary Service’ would become liable only if the service is rendered in relation to the business of the recipient. In the present case, the appellant, as a contractor, has engaged in collecting statutory levies on behalf of the Government department (CTD)/ statutory authority (NHAI) neither of whom are engaged in business. Secondly, we are of the view that the levy of Service Tax cannot be sustained on the Commission retained by the appellant.
7. In respect of the activity of toll collection, it is also fairly well settled that no Service Tax can be levied on such an activity as held by the Tribunal in the case of Commissioner v/s Intertoll ICS (supra) in which the Tribunal observed 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.”
8. On the activity of collection of commercial taxes, for CTD we are of the view that the appellant will also be entitled to the benefit to exemption under Notification No. 13/2004-ST dated 10/09/2004 which specifically exempts the services provided by any person to the Government of State in relation to collection of any duties or taxes levied by the Government from the whole of the Service Tax leviable thereon.
9. In the result, impugned order is set aside and appeal is allowed.
(Dictated and pronounced in the open court)
