Custom, Excise & Service Tax Tribunal
M/S Mumbai International Airport Pvt. ... vs Commissioner Of Service Tax, Mumbai-I on 4 July, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Application No. ST/S/1354/2012 in Appeal No. ST/411/2012 (Arising out of Order-in-Original No. 65/STC-I/SKS/11-12 dated 29.2.2012 passed by the Commissioner of Service Tax, Mumbai-I). For approval and signature: Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s Mumbai International Airport Pvt. Ltd. Appellant Vs. Commissioner of Service Tax, Mumbai-I Respondent Appearance: Shri V. Sridharan, Sr. Advocate Shri Tarun Govil, Advocate Ms. Neha Thakur, Advocate for Appellant Shri K. Sitalwad, Addl. Solicitor General for Respondent CORAM: SHRI P.R. CHANDRASEKHARAN, MEMBER (TECHNICAL) SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 04.07.2013 Date of Decision: 04.07.2013 ORDER NO. Per: P.R. Chandrasekharan
The appeal and stay petition arise from Order-in-Original No. 65/STC-I/SKS/11-12 dated 29.2.2012 passed by the Commissioner of Service Tax, Mumbai-I.
2. The appellant, M/s Mumbai International Airport Pvt. Ltd. (MIAL in short) are a joint venture company undertaking the operations of Mumbai International Airport and are registered with the Department for Service Tax purpose under various categories of taxable services. The appellant was collecting Development Fee (DF in short) from the every departing passenger in the airport in terms of Section 22A of the Airport Authority of India Act, 1994 (AAI Act in short). The first such levy of DF was authorized by the Government of India w.e.f. 1.4.2009 and the Ministry of Civil Aviation vide letter dated 27.2.2009 had conveyed the approval of the Central Government under Section 22A of the AAI Act, 1994 for levy of DF at Mumbai Airport @ Rs.100/- per departing domestic passenger and Rs.600/- per departing international passenger w.e.f. 1.4.2009. However, the appellant did not discharge any Service Tax liability on the said DF on the ground that the purpose of collection of DF is funding and financing the cost of up-gradation, expansion or development of the airport and the appellant does not have any obligation to provide any services to the passengers from whom the DF is collected. They were also of the view that the DF collection is a mode of capital funding for the project and in the absence of rendering any service, no Service Tax is liable to be paid. However, the department was of the view that the appellant was allowed to collect DF on the condition that such receipts are treated as capital receipts for the future expansion of the airport. Therefore, the consideration received as fees from the departing passengers are in relation to taxable services rendered to them or to be rendered by the appellant. Since the appellant was paying Service Tax on Passenger Service Fee and User Development Fee, which are statutory levies imposed under Rule 86 and 89 of the Air Craft Rules, 1934, on DF collected also the appellant is liable to pay Service Tax. Accordingly, a show-cause notice dated 18.4.2011 was issued to the appellant proposing to classify the services rendered by the appellant to the departing passengers under category of Airport Services as defined under Section 65(3c) read with Section 65(105)(zzm) of the Finance Act, 1994 and to demand Service Tax amounting to Rs.54,68,47,002/- on the DF collected during the period April, 2009 to January, 2011 under the provisions of Section 73 of the Finance Act, 1994. The said notice also proposed to collect interest on the said Service Tax demand under Section 75 and to impose penalties on the appellant under Sections 76, 77 and 78 of the Finance Act, 1994. The case was adjudicated vide the impugned order and the Service Tax demand was confirmed along with interest thereon. A penalty of Rs.5000/- was imposed under Section 77 and a penalty of Rs.49,57,81,507/- was imposed under Section 78 of the Finance Act, 1994. Aggrieved of the same, the appellant is before us.
3. The learned Counsel for the appellant made the following submissions: -
(i) In the case of Consumer Online Foundation Vs. Union of India (2011) 5 SCC 360, the appellant was one of the respondent and it was held by the Hon'ble Apex Court that DF is not in the nature of charges for consideration for service provided, but is in the nature of a Cess or Tax for generating revenue for specific purposes as mentioned under Section 22A of the AAI Act, 1994. Merely because DF is charged from the passenger as a component of the ticket issued by the Airlines, it does not mean that such levy is in lieu of granting the passenger access to the airport to reach the plain. Therefore, linking payment of DF to grant of access to the airports is not sustainable in law, especially when the Apex Court has held that levy under Section 22A of AAI Act is not charges or consideration for the facility provided by the Airport Authority. The Hon'ble Apex Court in the said case also held that levy under Section 22A of the AAI Act, though described as fee, is really in the nature of cess or tax for generating revenue for the purposes specified under Section 22A of the said Act and, therefore, no Service Tax is payable on such collection of tax.
(ii) In the case of Commissioner of Central Excise, Cochin Vs. Cochin International Airport Ltd. 2009 (16) STR 401 (Ker), the Hon'ble High Court of Kerala held that the User Fee collected by the Airport Authority is not liable to Service Tax as the same is not for rendering any services but for enhancing the revenue of the airport. The SLP filed by the Revenue against the order of the Kerala High Court was also dismissed by the Supreme Court.
(iii) Since the Development Fee is a tax levied and collected from the passenger, it cannot form part of the value of consideration of a taxable service. The Hon'ble Apex Court in the case of India Cement Ltd. Vs. State of Tamil Nadu AIR 1990 SC 85, Orissa Cement Ltd. Vs. State of Orissa & Ors. AIR 1991 SC 1676, State of Orissa & Ors. Vs. Mahanadi Coalfield Ltd. AIR 1995 SC 1868 had held that levy of tax on a tax is illegal and bad in law. Since the DF is a tax, Service Tax cannot be levied of the said tax.
(iv) The Revenue had made a reference to the Ministry of Law & Justice, Department of Legal Affairs and the Solicitor General of India as to whether Service Tax can be levied on DF and the Law Ministry as also the Solicitor General of India had opined that DF is not a consideration for services rendered at the airport or for the use of the airport and, therefore, no Service Tax is chargeable. In spite of such an advice from the Law Ministry and Solicitor General of India, the department has proceeded to demand Service Tax ignoring such advice.
(v) Services by way of construction, erection, commissioning or installation pertaining to airport continue to be exempted under Notification No. 25/2012-ST dated 20.6.2012 and earlier, the definition of Commercial and Industrial Construction Service vide Section 65 (25b) and Works Contract Service vide section 65(105)(zzza) excluded from its scope, the levy of Service Tax on such activity undertaken in respect of airports and therefore, the same cannot be taxed under airport service.
(vi) The reliance place by the adjudicating authority on the decision of High Court of New Zealand in the case of Rotorua Regional Airport Ltd. Vs. Commissioner of Inland Revenue is not applicable to the Indian situation for the reason that the Goods and Service Tax Act, 1985 of New Zealand deals with a system of comprehensive taxation of all services other then those covered under the category of exempted supplies. However, in the present case, under the Finance Act, 1994, only those services are chargeable to Service Tax, which are specified and defined under the various sub-clauses of Clause 105 of Section 65.
In the light of the above, it is submitted that the demand of Service Tax on the appellant is unsustainable in law and, therefore, the same is liable to be set aside.
4. The learned Addl. Solicitor General of India appearing on behalf of the Revenue made the following submissions: -
(i) As per the provisions of Section 22A of the AAI Act, 1994, levy and collection of DF is allowed for funding and financing the cost of upgradation, expansion or development of the airport at which the fee is collected and establishment or development of a new airport in lieu of the airport at which fee is collected. MIAL has collected about Rs.530 crores during April, 2009 to January, 2011 by way of DF and the same has been deposited in a separate escrow account and the Airport Authority of India and the Central Government has supervisory powers in respect of the said escrow account to ensure that money is spent only for the specified purposes. MIAL has clarified that DF collected by them has been utilized for the construction of the following assets, namely, Runway, Taxiways, Air field ground lighting, New Integrated Terminal, Terminal 1C at Mumbai Airport and Air Traffic Control power.
(ii) As per Section 65(105)(zzm) taxable service means any service provided or to be provided to any person by Airport Authority or any other person, in any airport or civil enclave and the terms service provider shall be construed accordingly. Therefore, any service provided in any airport or civil enclave is treated as a taxable service and the scope of airport service is very wide. The definition of taxable service in relation to Airport Service does not provide any condition to any provision of service in relation to any particular activity and this is a major difference in the definition of the Airport Services as compared to the other definitions provided in the Finance Act.
(iii) The Hon'ble High Court of New Zealand in the case of cited supra, has, inter alia, held that the use to which the funds are in fact put is not relevant. Further, even though as per the leased documents Rotorua Regional Airport Ltd. was required to use the fund for the future facilities like development of airport and the local Council was supervising the use of said fund which was akin to tax levied by legislation but these aspects were not relevant for deciding the levy of GST. The payment of the said levy was to enable departing passengers to access the plane and, therefore, there is a nexus or reciprocation between the payment and the service which consideration in respect of supply of services. When a road or a bridge is constructed by a company and the government permits them to collect the toll for use of the said road or bridge, it cannot be said that the charges collected are not for using the road or bridge and it is immaterial whether the charges is meant for recovery of construction cost or other purposes.
(iv) MIAL, in the Consumer Online Foundation case, themselves had pleaded that they have collected the DF not as a tax, but as charges for development of facilities for the use at the airport. From this pleading taken by the appellant before the Supreme Court, it is obvious that the intent of MIAL was to charge the DF as a consideration for using the airport facilities provided by them. Without the payment of development fee, a person cannot enter the airport and, therefore, any payment made for gaining access to the airport and to reach the plane has a clear nexus between the amount charged by the MIAL and amount paid by the passenger.
(v) As regards the reliance placed by the appellant on the Cochin International Airport Ltd. (supra) case, the facts are different. In the said case, it was held that the User Fee collected from the international passenger was not for any services rendered, but only to augment financial situation of the appellant and hence, Service Tax was not payable. However, situation in the present case is different. The DF has been collected for the purpose of development and modernization of airport, which is one of the services required to be provided by the Airport Authority of India under Section 12 of the AAI Act, 1994. In the Consumer Online Foundation case relied upon by the appellant, the Hon'ble Apex Court held that DF was not a legally collected tax inasmuch as rules were not made for the collection of the same and, therefore, the levy and collection of DF was ultra vires of the AAI Act, 1994. Inasmuch as the DF is not a legally collected tax, it loses the nature of a tax.
(vi) It is further argued that from the escrow account opened by MIAL with the bank, it can be seen that they were aware of their liability to pay service tax in as much as they had maintained a separate account known as DF Escrow ST Account 9706 and in the said account, Service Tax was required to be deposited. The said Service Tax was on the DF collected by them. Thus, at the time of collecting the said DF, the intention of the appellant was to charge the Service Tax.
(vii) As regards the contention of the appellant that the Law Ministry and the Solicitor General of India have opined that the Service Tax is not leviable on the DF, these are independent view and the adjudicating authority is not bound by these opinions. The Ministry in its instruction vide letter F. No. 106/Commr(ST)/2009 dated 8.7.2011 has clearly held that DF is chargeable to Service Tax.
In the light of the above, it is prayed that the impugned order be sustained.
5. We have carefully considered the submissions made by both the sides.
5.1 The vires of the levy of DF under the AAI Act, 1994 at the Indira Gandhi International Airport, New Delhi and Chhatrapati Shivaji International Airport, Mumbai was a subject matter of dispute and consideration before the Hon'ble Apex Court in the case of Consumer Online Foundation Vs. Union of India (supra). In the said case, the appellant herein was also a party and it was contended by the appellant that the collection of DF under Section 22A of the AAI Act, 1994 is in the nature of a tariff or charges collected by the Airport Authority for the facility provided to the passengers and the airlines. However, the Hon'ble Apex Court did not accept this plea and held that DF is really in the nature of a cess or a tax for generating revenue for the specific purposes mentioned in clauses (a), (b) and (c) of Section 22A. The relevant extracts from the said decision is reproduced below: -
14. The High Court was not correct in coming to the conclusion in the impugned judgment that the development fees to be levied and collected under Section 22A of the 1994 Act is in the nature of tariff or charges collected by the Airports Authority for the facilities provided to the passengers and the airlines. It will be clear from a bare reading of Sections 22 and 22A that there is a distinction between the charges, fees and rent collected under Section 22 and the development fees levied and collected under Section 22A of the 1994 Act. The charges, fees and rent collected by the Airports Authority under Section 22 are for the services and facilities provided by the Airports Authority to the airlines, passengers, visitors and traders doing business at the airport. Therefore, when the Airports Authority makes a lease of the premises of an airport (including buildings and structures thereon and appertaining thereto) in favour of a lessee to carry out some of its functions under Section 12, the lessee, who has been assigned such functions, will have the powers of the Airports Authority under Section 22 of the Act to collect charges, fees or rent from the third parties for the different facilities and services provided to them in terms of the lease agreement. The legal basis of such charges, fees or rent enumerated in Section 22 of the 2008 Act is the contract between the Airports Authority or the lessee to whom the airport has been leased out and the third party, such as the airlines, passengers, visitors and traders doing business at the airport. But there can be no such contractual relationship between the passengers embarking at an airport and the Airports Authority with regard to the up- gradation, expansion or development of the airport which is to be funded or financed by development fees as provided in clause (a) of Section 22A. Those passengers who embark at the airport after the airport is upgraded, expanded or developed will only avail the facilities and services of the upgraded, expanded and developed airport. Similarly, there can be no contractual relationship between the Airports Authority and passengers embarking at an airport for establishment of a new airport in lieu of the existing airport or establishment of a private airport in lieu of the existing airport as mentioned in Clauses (b) and (c) of Section 22A of the 1994 Act. In the absence of such contractual relationship, the liability of the embarking passengers to pay development fees has to be based on a statutory provision and for this reason Section 22A has been enacted empowering the Airports Authority to levy and collect from the embarking passengers the development fees for the purposes mentioned in clauses (a), (b) and (c) of Section 22A of the Act. In other words, the object of Parliament in inserting Section 22A in the 2004 Act by the Amendment Act of 2003 is to authorize by law the levy and collection of development fees from every embarking passenger de hors the facilities that the embarking passengers get at the existing airports. The nature of the levy under Section 22A of the 2004 Act, in our considered opinion, is not charges or any other consideration for services for the facilities provided by the Airports Authority. This Court has held in Vijayalashmi Rice Mills & Ors. v. Commercial Tax Officers, Palakot & Ors. (supra) that a cess is a tax which generates revenue which is utilized for a specific purpose. The levy under Section 22A though described as fees is really in the nature of a cess or a tax for generating revenue for the specific purposes mentioned in clauses (a), (b) and (c) of Section 22A. 5.2 A similar issue arose before the Hon'ble High Court of Kerala in the case of Cochin International Airport Ltd. (supra). In that case Cochin International Airport collected User Fee @ Rs.500/- for every outgoing international passenger. The Revenue sought to demand Service Tax on the amounts so collected under the category of Airport Services. The Hon'ble High Court held that the purpose of User Fee is augment revenue as per the decision of Board of Directors and not for any services rendered to the outgoing international passengers and, therefore, no Service Tax is leviable on the User fee collected under the category of Airport services. The said decision of the Hon'ble High Court was also affirmed by the Hon'ble Apex Court in the same case reported in 2010 (17) STR A79 (SC). From this decision, what emerges is that the charges collected either by way of DF or by way of User Fee is not in respect of any particular service rendered by the Airport Authority. If that be so, we do not understand how in the present case, the Revenue can argue that the DF collected is for the services rendered by the appellant to the passengers boarding the flight from the Mumbai International Airport. In the Consumer Online Foundation case (supra), the Hon'ble Apex Court directed that since it is difficult to locate and identify from the embarking passenger from whom Development Fees have been collected, the Airport Authority at these places were allowed to retain the DF levied and collected and to utilize the same for the specific purpose mentioned under Section 22A of the AAI Act, 1994 and to account for the same to Airport Authority of India.
5.3 Section 22A gives the power to levy DF at airports and reads as follows: -
[22A. Power of Authority to levy development fees at airports.-The Authority may,
(i) after the previous approval of the Central Government in this behalf, levy on, and collect from, the embarking passengers at an airport, other than the major airports referred to in clause (h) of Section 2 of the Airports Economic Regulatory Authority of India Act, 2008 the development fees at the rate as may be prescribed
(ii) levy on, and collect from, the embarking passengers at major airports referred to in clause (h) of Section 2 of the Airports Economic Regulatory Authority of India Act, 2008 the development fees at the rate as may be determined under clause (b) of sub-section (1) of Section 13 of the Airports Economic Regulatory Authority of India Act, 2008, and such fees shall be credited to the Authority and shall be regulated and utilized in the prescribed manner, for the purposes of-
(a) funding or financing the costs of upgradation, expansion or development of the airport at which the fee is collected; or
(b) establishment or development of a new airport in lieu of the airport referred to in clause (a); or
(c) investment in the equity in respect of shares to be subscribed by the Authority in companies engaged in establishing, owning, developing, operating or maintaining a private airport in lieu of the airport referred to in clause (a) or advancement of loans to such companies or other persons engaged in such activities.] 5.4 From the above provisions, it is clear that the amount collected from the embarking passengers is to be used for funding and financing the cost of upgradation, expansion or development of the airport at which the fee is collected or establishment of a new airport in lieu of the existing airport or investment in equity to be so be subscribed by the Airport Authority in the company engaged in establishing, owning, developing, operating or maintaining a private airport. Thus, the purpose for which the DF is collected and its utilization is clearly laid down under Section 22A. Notification No. 25/2012-ST dated 20.6.2012, service by way of construction, erection, commissioning or installation of original works pertaining to airport is exempted. Prior to 2012 and during the impugned period, these activities were specifically excluded from the purview of Service Tax levy both under commercial or industrial construction service as defined under Section 65(25b) and also under Works Contract Service as defined under Section 65(105)(zzzza). If that be so, we do not understand how Service Tax can be levied on this activity in the guise of providing access to passengers to the airport, so as to enable them to board the aircraft. In other words, the Revenue is trying to levy Service Tax indirectly what has been specifically excluded under the Construction Service and Works Contract Service.
5.5 A similar issue arose before the Constitutional Bench of the Hon'ble Apex Court in the case of Commissioner of Central Excise, Pondicherry Vs. Acer India Ltd. 2004 (172) ELT 289 (SC) and it was held that when goods cannot be taxed directly, it cannot be permitted to be taxed indirectly. Though this decision pertain to excise duty on computer software, the ratio of this decision applies equally well in respect of Service Tax also. In a service tax matter relating to technical testing and analysis services in the case of Commissioner of Central Excise vs. Dr. Lal Path Lab (I) Ltd. decided on 14-9-2007, the honble Punjab & Haryana High Court held that what is specifically kept out of a levy by the Legislature under one entry cannot be subjected to tax by the Revenue under another entry.
5.6 The learned Adjudicating authority has placed reliance on the decision of the Hon'ble High Court of New Zealand in the case of Rotorua Regional Airport Ltd. Vs. Commissioner of Inland Revenue. In the said case, the question before the Hon'ble High Court was whether Goods and Service Tax is leviable on $5 levied on passengers departing from the airport. In that case departing passengers were required to make payment of DF at a specific counter at the airport and were given an adhesive ticket to attach to their boarding pass. Section 6(1) of the GST Act of New Zealand defined the taxable activity as follows: -
(a) any activity which is carried on continuously or regularly by any person, whether or not for a pecuniary profit, and involves or is intended to involve, in whole or in part, the supply of goods and services to any other person for a consideration; and includes any such activity carried on in the form of a business, trade, manufacture, profession, vocation, association, or club:
(b) without limiting the generality of paragraph (a), the activities of any public authority or any local authority. It was in that context, it was held that the activity amounts to provision of service under the GST Act and accordingly, GST would apply in respect of the DF collected holding that payment of DF enables departing passengers to access the plane. The scope and coverage of GST in New Zealand and the scope of Service Tax in India are vastly different; so also the legal provisions. Therefore, blind reliance on a decision rendered in a different context is neither healthy nor desirable.
5.7 While relying on the decisions rendered in respect of a law legislated outside India, it is worth remembering the honble Apex Courts advice in this regard extracted from [AIR 1981 Patna 309 at p 311 (FB)]-
It is the part of judicial prudence to decide an issue under a specific statute by confining the focus to that statutory compass as far as possible. Diffusion into wider jurisprudential areas is fraught with unwitting conflict or confusion. The Honble Supreme Court in the case of Alnoori Tobacco Products 2004 (170) ELT 135 (SC) also observed that-
13.?Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.
14.?The following words of Lord Denning in the matter of applying precedents have become locus classicus :
Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. ??***????????***?????????????*** Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it. 5.8 Service Tax in India prior to 2012 was selective in scope of levy and all activities were not taxed, but only taxable services as defined in law were liable to tax. Even when Airport Service was introduced, a service which was not a taxable service, was not liable to Service Tax under the Airport Service if the said service performed outside the Airport or Civil Enclave was not taxable . A Circular issued by the CBE&C in this regard clarifies the position. Circular dated 17.9.2004 as regards Airport service clarified as follows: -
Airport Services: Services provided in an airport or civil enclave, to any person by Airports Authority of India (AAI), a person authorized by it, or any other person having charge of management of an airport are taxable under this category. This includes variety of services provided to airlines, as well as for cargo and passenger handling such as security, transit facilities, landing charges, terminal navigation charges, parking and housing charges and route navigation facility charges. It would be on the gross amount chargeable by AAI or other such authorized person. Thus, charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to Service Tax. However, in case a part of airport/civil enclave premises is rented/leased out, the rental/lease charges would not be subjected to Service Tax, as the activity of letting out premises is not rendering a service. From the underlined portion above, it is clear that if an activity is not a taxable service as defined in law, even if it is rendered within the airport, it would not be taxable. That is why the renting of immovable property in an Airport prior to 1.6.2007 was not taxable under the Airport Services since renting of immovable property was not a taxable service. Similarly, there are other services performed in the Airport, such as Porterage Services, Escort Services, Wheelchair Services and so on. It is not the case of the Revenue that they are collecting Service Tax on these services rendered in the Airport as these are not taxable services otherwise. Therefore, we do not understand how providing access to an airplane would be a taxable service under the Airport Service as held in the impugned order.
5.9 It is also relevant to note that in the present case, the DF is charged as part of the air fare or the cost of the ticket by the Airlines. When a ticket is issued to a passenger, it pre-supposes access to the aeroplane, where the access is provided by an Airline or by any other agency. Otherwise, the issue of a ticket becomes meaningless. It is like asking a passenger who has a ticket to travel by train/bus to take platform/entry ticket so that he can board the train/bus. If that be so, the consideration received for travel by air becomes taxable under the category of Air Transport service to passengers of domestic or international air journey, which came under the tax net for international travel w.e.f. 1.5.2006 other than economy travel and in respect of all domestic and international journey w.e.f. 1.7.2010. If that be so, the said activity could not have been taxed under the Airport Service at all.
5.10 A similar issue came up for consideration as to whether Service Tax is leviable on the Toll or User Charges or Access Fee paid by the road users. The CBE&C vide Circular No. 152/3/2012-Service Tax dated 22.2.2012 clarified that Service Tax is not leviable on Toll paid by the users of roads and the said Circular is reproduced below: -
Subject: Toll in the nature of user charge or access fee paid by roads users regarding.
A representation has been received by the Board, seeking clarification regarding leviability of service tax on toll fee (hereinafter referred as toll) paid by users, for using the roads. The representation has been examined.
2. Service tax is not leviable on toll paid by the users of roads, including those roads constructed by a Special Purpose Vehicle (SPV) created under an agreement between National Highway Authority of India (NHAI) or a State Authority and the concessionaire (Public Private Partnership Model, Build-Own/Operate-Transfer arrangement). Tolls is a matter enumerated (serial number 59) in List-II (State List), in the Seventh Schedule of the Constitution of India and the same is not covered by any of the taxable services at present. Tolls collected under the PPP model by the SPV is collection on own account and not on behalf of the person who has made the land available for construction of the road.
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]. If the access to a road is not leviable to Service Tax, it does not stand to any logic or reason that access to the airport/airplane by a passenger should be subjected to levy of Service Tax.
5.11 Since in the Consumer Online Foundation case, the Hon'ble Apex Court has held that DF is really in a nature of cess or a tax for generating revenue for specific purposes, question arises whether the tax can be imposed on another tax. Such an issue came for consideration before the Hon'ble Apex Court in the case of Orissa Cement Ltd. Vs. State of Orissa (supra). The issue was whether a cess can be levied on the royalty for mining lands. It was contended that royalty for mining lands is not a tax on land, but a payment for use of the land and, therefore, cess can be levied. Negativing the contention, it was held that levy of a cess on royalty is unconstitutional. The CBE&C itself on a number of occasions have clarified that while computing the taxable value, the other taxes/fees paid should be excluded for the purpose of levy of Service Tax. Circular No. 89/2006 dated 18-12-2006 issued from File No. 255/1/2006 CX4 refers. If that be so, if DF is in the nature of a cess or a tax, the question of levying Service Tax thereon would not arise at all.
6 In the impugned order, we find that none of these issues, germane to the exigibility to service tax has been considered by the adjudicating authority at all. Therefore, the matter needs fresh consideration. Accordingly, we remand the matter back to the adjudicating authority for de novo consideration of the various issues involved as discussed above, taking into account, inter alia, the decisions of the Hon'ble Apex Court in the case of Consumer Online Foundation, Cochin International Airport Ltd., Acer India Ltd, Orissa Cement Ltd. and the various instructions issued by the CBE&C (cited supra) and thereafter, pass a fresh order after granting the appellant a reasonable opportunity of being heard. The appellant is also directed to co-operate with the department and make their submissions without resorting to any dilatory tactics. Since the revenue involved is significant, we direct the adjudicating authority to pass a de novo order within a period of three months from the date of communication of this order.
7. Thus, the appeal is allowed by way of remand. The stay petition is also disposed of.
(Operative portion of the order pronounced in Court)
(Anil Choudhary) (P.R. Chandrasekharan)
Member (Judicial) Member (Technical)
Sinha
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