Adda Fees At Bus Terminal Not Taxable As Business Support Service: CESTAT Chandigarh
Pranav B Prem
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member), has held that adda fees collected at the Amritsar bus terminal are not taxable as “Business Support Services” under the Finance Act, 1994. The Tribunal was dealing with six appeals filed by Rohan and Rajdeep Infrastructure Pvt. Ltd. against orders confirming service tax demands along with interest and penalties for the period from October 2006 to March 2015.
Also Read: Service Tax Exemption on Road Construction Depends on Public Use: CESTAT
The appellant had entered into a Build-Operate-Transfer concession agreement with the Punjab Infrastructure Development Board (PIDB) under the Punjab Infrastructure (Development & Regulation) Act, 2002, for the construction, operation and maintenance of the Amritsar bus terminal. Under the agreement, the appellant undertook the development, financing, design, construction, operation and maintenance of the terminal and was permitted to collect adda fees from bus operators during the concession period. The ownership of the project remained with the authority at all times and the assets were to be transferred back to the State at the end of the concession period.
The Department alleged that the adda fees constituted consideration for providing “Business Support Services” to bus operators, since the facilities at the terminal such as parking, ticket counters and other amenities supported their business operations. Based on this, show cause notices were issued and demands were confirmed along with penalties under various provisions of the Finance Act.
The appellant contended that there was no contractual relationship between it and the bus operators. The concession agreement was only between the appellant and PIDB, and the adda fees were fixed by the State Government. It was argued that the fees were merely a mechanism permitted by the authority to recover the investment made in constructing and operating the terminal, and not consideration for any service rendered to the bus operators.
After examining the concession agreement and statutory provisions, the Tribunal found that the appellant was permitted to collect adda fees “in lieu of consideration payable by PIDB for the construction and development of the project,” and that the appellant had no role in determining the fee, which was fixed by the authority.
The Tribunal observed that the definition of “Business Support Service” covers services that are outsourced by a business entity. It held that it would be incorrect to conclude that bus operators had outsourced the construction of the bus terminal to the appellant. Rather, the appellant had undertaken the project under a concession agreement with the State authority, and there was no privity of contract between the appellant and the bus operators.
It further noted that service tax is a contract-based levy and the liability must be determined based on the contract between the service provider and the recipient. In the present case, the only contract was between the appellant and the State authority, and not with the bus operators.
The Tribunal also distinguished the earlier decision in Prem Kumar Maini, relied upon by the Department, noting that in that case the operator was merely maintaining an existing terminal, whereas in the present case the appellant had constructed an entirely new terminal at its own cost under a BOT arrangement.
On the issue of limitation, the Tribunal found that the Department had been aware of the appellant’s activities and had received relevant information. It held that there was no evidence of suppression, fraud or wilful misstatement, and therefore a substantial part of the demand was time-barred. In view of these findings, the Tribunal held that the service tax demand on adda fees under the category of “Business Support Services” was not sustainable. The impugned orders were set aside and all six appeals were allowed with consequential relief to the appellant.
Cause Title: Rohan And Rajdeep Infrastructure Pvt Ltd. Versus Commissioner of Central Excise & Service Tax
Case No.: Service Tax Appeal No. 55340 of 2013
Coram: S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member)
