Custom, Excise & Service Tax Tribunal
Dep Tolls Llp vs Additional Director General ... on 7 January, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi
PRINCIPAL BENCH - COURT NO. 3
Service Tax Appeal No. 50130 Of 2022
[Arising out of Order-in-Original No. 18/2020-ST dated 01.10.2020 passed by the
Additional Director General (Adjudication), New Delhi]
DEP Tolls LLP : Appellant
C/o Ankit Kumar, Bhagvati Dharmshala
Kalkaji Mandir, New Delhi
Vs
Additional Director General : Respondent
(Adjudication), DFFSTI, New Delhi West Block-VIII, Wing-6, 2nd Floor, R. K. Puram, New Delhi with Service Tax Appeal No. 50132 Of 2022 [Arising out of Order-in-Original No. 18/2020-ST dated 01.10.2020 passed by the Additional Director General (Adjudication), New Delhi] Ajay Agrawal : Appellant Former Designated Partner, M/s. DEP Tolls LLP Vs Additional Director General : Respondent (Adjudication), DFFSTI, New Delhi West Block-VIII, Wing-6, 2nd Floor, R. K. Puram, New Delhi APPEARANCE:
Shri B. L. Narasimhan and Shri Kunal Aggarwal, Advocates for the Appellant Ms. Jaya Kumari, Authorized Representative for the Respondent CORAM :
HON'BLE MS. BINU TAMTA, MEMBER (JUDICIAL) HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) FINAL ORDER No. 50143-50144/2026 Date of Hearing:07.01.2026 Date of Decision:07.01.2026 2 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 HEMAMBIKA R. PRIYA The present appeals have been filed by M/s Dep Tolls LLP 1 and Ajay Agrawal2 against the Order-in-Original No. 18/2020-ST dated 01.10.2020 wherein the demand of Rs. 6,64,88,464/- along with interest has been confirmed along with penalty of Rs. 6,64,88,464/-.
Penalty of Rs. 10,000/- has been imposed on Appellant No. 2.
2. The brief facts of the case are that SDMC floated an offer-cum request for proposal and invited bids from contractors for collection of toll at 124 toll plazas / posts for a period of 40 weeks against a reserve price of Rs. 441 crores. The Appellant No. 1 submitted its proposal in response to the tender, which was accepted by SDMC vide Letter dated 23.01.2016. The arrangement culminated into execution of Agreement dated 29.01.2016 giving right to the Appellant to, inter alia, collect toll charges upon delivery of real and constructive possession of the toll plazas to the appellant. As per the agreement, the Appellant was required to pay to the SDMC the agreed fixed bid amount of Rs. 488.07 crores in intervals of 40 weeks' time, irrespective of the amount collected by it as toll tax. Upon collection of toll tax from users of road, any profit (amount collected over the bid amount) or loss (collection is less than the bid amount) was to the account of appellant. The appellant neither collected nor paid Service Tax on the amount retained (if any) after payment of the bid amount to SDMC under the bona fide belief that no services were provided by Appellant-1 corresponding to the excess amount. Pursuant to an investigation, SCN dated 08.12.2017 was issued to Appellants for the 1 appellant No. 1 2 appellant No. 2 3 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 relevant period proposing demand of Service Tax of Rs. 7,68,21,989 on the amount retained by the Appellant- 1, after payment of the fixed bid amount to SDMC. The appellant had rendered a service to SDMC, the consideration in lieu of which, was the amount retained by the Appellant, which was susceptible to Service Tax. The show cause notice was adjudicated vide the impugned Order, whereby after extending cum tax benefit, demand of Service Tax of Rs. 6,64,88,464 was confirmed. Hence, the present appeals filed by the appellants is before this Tribunal.
3. Learned counsel for the appellants submitted that the issue is no longer res-itegra. Appellant No. 1 had collected toll in its own right and not on behalf of SDMC, and is a non-taxable service. In the present case, the demand has been confirmed on the ground that appellant No. -1 collected toll tax on behalf of SDMC, and for such services, consideration is in the form of the amount retained by the Appellant after paying the fixed bid amount to SDMC. In this regard, Learned counsel submitted that the demand of service tax is in direct contradiction to the settled legal position that when collection of toll is undertaken by contractors on principal-to-principal basis, then such contractor cannot be considered as an agent acting on behalf of the government body. Further, when the arrangement with the contractor mandates payment of a fixed bid amount, regardless of ultimately incurring profit or suffering loss, then the contractor is collecting toll in the course of its own business. Reliance in this regard is placed on the case of Commissioner of Service Tax, Mumbai V. Ideal Road 4 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 Builders Pvt. Ltd.3 wherein it was categorically held that since the taxpayer had secured the right to toll collection against payment of a fixed bid amount to NHAI, and that NHAI was nowhere concerned with the ultimate quantum of toll collected by the taxpayer, the collection of toll could not be said to have been undertaken on behalf of NHAI, The bid amount, therefore, was treated as the income of the taxpayer on account of its own toll business. The said decision in the case of Ideal Road Builders (Supra) has been followed in:
(i) Sangam (India) Ltd. Vs. Commissioner of Central Excise, Udaipur4
(ii) Souvenir Developers India Pvt Ltd Vs. Commissioner of Central Excise, Customs & Service Tax-I5
(iii) Premier Car Sales Ltd., Vs. Commissioner (Audit), CGST & Central Excise, Lucknow6
(iv) Ashoka Buildcon Ltd. Vs. Commissioner of Service Tax Nashik7
(v) D.V Pawan Kumar, Proprietor Vaishnavi Distributors Vs. C.C.,C.E. & S. T- Cochin8
(vi) Sitaram India Ltd. Vs. Commissioner CE & CGST Division-E, Bhilwara (Rajasthan)9
(vii) MEP Infrastructure Developers Limited. Vs. The Commissioner of CGST and Central Excise, Audit-III, Mumbai10
(viii) Ideal Road Builders Pvt Ltd Vs. Commissioner of Service Tax, Mumbai11
(ix) PNC Infratech Ltd. (Formerly Known as PNC Construction Co. Ltd.) Vs. CCE Ludhiana12 3 2018 (12) GSTL 192 (Tribunal Mumbai) 4 2023 (73) GSTL 87 (Tri.- Del.) 5 2022 (64) G.S.T.L. 105 (Tri. Mumbai) 6 2024-VIL-878-CESTAT-ALH-ST 7 2017 (49) S.T.R. 404 (Tri. - Mumbai) 8 Final Order No. 20011/2022 dated 07.01.2022 9 FINAL ORDER No. 50317/2022 dated 05.04.2022 10 WRIT PETITION NO. 1789 OF 2021 11 2015 (40) S.T.R. 480 (Tri. - Mumbai) 12 Final Order No. A/60181/2023 dated 04.07.2023 5 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022
(x) A. Srinivasulu & Co Vs. Commissioner of Customs, Central Excise & Service Tax, Visakhapatnam -II13
4. Learned Authorized Representative reiterated the findings of the impugned order. He fairly conceded that the issue is no more res- integra and has been settled by the various decisions of the Tribunal.
5. We have heard the learned counsel for the appellant and the learned Authorized Representative for the Department. We note that Section 113 (2) (g) of the Delhi Municipal Corporation Act, 1957 ('DMC Act') empowers the Municipal Corporation of Delhi to levy and collect toll tax on commercial vehicles entering the limits of National Capital Territory of Delhi. Section 482 (1)(A)(9) of the DMC Act empowers the MCD to make bye-laws for matters concerning, inter alia, collection of taxes under the DMC Act. Basis such empowerment, the Delhi Municipal (Toll Tax) Bye-laws, 2007 (Toll Tax Bye-Laws') were notified, which permitted the MCD to allot the work of collection of toll tax to private entities, either against receipt of commission or on procuring the right by payment of a fixed amount to the MCD. During the relevant period, South Delhi Municipal Corporation ('SDMC') was one of the Municipal Corporations in Delhi. Further, Annexure 12 to document titled 'Volume-I-Instructions to Bidders' specified that the bidder was to submit its financial proposal to SDMC for grant of authorization rights for Toll & EC Collection at toll plazas at Delhi border for 40 weeks against payment of the total bid amount, apportioned on a weekly basis for 40 weeks. The Appellant No. 1 had acted on principle to principle basis when they had collected tax. 13 FINAL ORDER No. A/31320/2018 dated 09.10.2018 6 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 Hence, there was no service rendered by the appellants to SDMC. It is also noted that the issue is no more res-inegra. In the case of Sangam (India) Limited (supra), the Tribunal held as under:-
"9. We have heard the arguments carefully. The core issue to be decided is whether the collection of toll/user fee by the appellant on behalf of NHAI tantamounts to a service and whether such amount is chargeable to service tax?
10. We note that the appellant responded to a tender floated by NHAI for collection of toll charges on specified sections of the highways. The appellant was successful in this bid and offered the highest assured payment at specified intervals and emerged as the designated operator. The expenditure for maintenance of the assigned section was to be met from the toll collected at rates determined by the Government from time to time with the balance, if any, after the setting off the lumpsum payments, being the returns to the operator. The non-payment of tax on this consideration led to issue of show cause notice culminating in the impugned order.
11. We find that the allegation that the appellant worked as a „Commission Agent‟ on whose behalf he collects the toll, appears to have overlooked the underlying scheme of the tender which brought the appellant into this transaction. The contractual arrangement between the appellant and NHAI was for undertaking the collection of toll or user fee. The terms of the contract is very clear : possession of the „Kanwaliyas Toll Plaza‟ asset is transferred to the appellant for the stream of lumpsum payment guaranteed by the appellant. Any deficit returns owing to decreased vehicular traffic or any other reason affects the revenue steam of the appellant. A „Commission Agent‟ is akin to a channel partner in delivery of goods/service, wherein the Principal bears all the risks. In the instant case, the tax liability does not arise by way of being Commission Agent as per Section 65(19) of the Finance Act, 1994 for the period prior to introduction of negative list regime.
12. We note that this issue under consideration is squarely covered by the order of this Tribunal in the case of Souvenir Developers India Pvt. Ltd. v. Commissioner of Central Excise, Customs & Service Tax I (supra). The relevant extract is as follows :
"10. The submission that the agencies of the State Government are „clients‟ of the appellant on whose behalf maintenance of roads is undertaken appears to have overlooked the underlying scheme of the tender which brought the appellant in to the transaction. The contractual arrangement between the appellant and the agencies of the State was for undertaking collection of „toll‟ or „user fee‟, as the case may be, while also ensuring maintenance of roads in the condition in which these were handed over. These may, at best, be perceived as rendering service to these agencies of the State, and with 'user' of the road as nothing but statistical probability when their bid was made and 7 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 accepted, having no other intended recipient. Even this restricted depiction is founded solely on the fitment of the statutory definitions of the taxable service on to the commercial definitions employed in the contract without delving into the scheme. It is moot if, in the determination of tax liability, the commercial expressions deployed in a contract should be so construed, as the adjudicating authority has, without scrutinizing the context of the entirety of the contract for fitment within the charging provision of the statute.
11. ‟Toll‟ is a constitutionally authorized levy assigned to Governments of Constituent States of the Union and, unarguably, to be collected under the authority of the State Government. It is not the case of the service tax officers that the mechanism erected for such collection compromises the characteristic of the levy into two - „toll‟ and other - but that denomination of the latter as „commission‟ in the contract constitutes two activities of which only one was taxable. Concatenating the deprivation of authority to determine the charges leviable from users and the monitorial oversight by the agencies of the State Government, the adjudicating authority concluded that „principal and agent‟ relationship existed.
12. The megatrends in infrastructure development of the country in recent decades have increasingly incorporated private sector participation, to a lesser or larger degree, in big projects requiring massive investment for transfer of risk to the private entity - whose core competency it is - and, in return for assured lumpsum payment, also the potential earnings through models such as „Build Operate Transfer‟ (BOT) and „Build Own Operate Transfer‟ (BOOT). The terms of engagement is thus clear : possession of the upgraded/constructed asset is transferred to the appellant for the stream of lumpsum payment guaranteed by the appellant while alienating risk of sub-optimal use and risk of asset deterioration. Any deficit in returns from lower traffic or owing to maintenance costs dents only the purse of the appellant. A „commission agent‟ is a channel partner in delivery of goods/service in which the risk of market rejection continues to be borne by the principal and bears no resemblance similarity to the contractual obligation in the impugned transaction of the appellant which is all about risk assumption. Oversight by agencies of the State is intended to assure proper maintenance of the asset and fixation of rates is retained by the Government to prevent exploitative exaction both of which are mandated by public interest and not as a facet of principal-agent equation. Thus, tax liability does not arise by way of being „commission agent‟ in Section 65(19) of Finance Act, 1994 for the period prior to introduction of „negative list‟ regime.
13. Insofar as the period after 1st July, 2012 is concerned, the adjudicating authority has determined that the activity conforms to the definition of „service‟ in Section 65B(44) of Finance Act, 1994 but devoid of the privilege of exclusion afforded by Section 66D(h) of Finance Act, 1994 that is available only to agencies of 8 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 State Government and not to the appellant rendering service to the said agency. Reliance was placed on Circular [No. 152/3/2012-S.T., dated 22nd February, 2012] of Central Board of Excise & Customs (C.B.E. & C.) distinguished the collection of „toll‟ by a Special Purpose Vehicle (SPV) established for a project and collection of „toll‟ by independent entity engaged for collection on commission, or other basis, for excluding the appellant from immunity to tax.
14. The narration in the said circular suggesting the dichotomous treatment does not even begin to appreciate the complexity of infrastructural creation. It was probably not intended to clarify anything beyond a model for collection simpliciter and the construing of such bland arrangement as intendment of tax liability in all models of road infrastructure partnership designs appears to be overreach on the part of the adjudicating authority. The circular, not having considered the degrees of private participation in infrastructure projects, is not a reliable guide to tax liability except in instances that was so intended therein.
15. We fail to perceive the authority under which the impugned order has concluded that, with effect from 1st July, 2012, the activity enumerated in the „negative list‟ in Section 66D of Finance Act, 1994 is restricted to the State and to agencies of the State. The exclusion of service by way of access to road or a „(h) bridge on payment of toll charges;‟ in Section 66D of Finance Act, 1994 does not bespeak any such restriction on the provider of service. Therefore, there can be no controversy on the immunity from tax for the period after 1st July, 2012 merely from transfer of responsibility for collection to the appellant."
13. We also find that the Tribunal has consistently held the same view in several of its decisions :
(1) Ideal Road Builders P. Ltd. v. Commissioner of Service Tax, Mumbai [2015 (40) S.T.R. 480 (Tri. -
Mum.)];
(2) Patel Infrastructure Pvt. Ltd. v. Commissioner of Central Excise, Rajkot [2014 (33) S.T.R. 701 (Tri. - Ahmd.)]; and (3) Ashoka Buildcon Ltd. v. Commissioner of Service Tax, Nashik [2017 (49) S.T.R. 404 (Tri. - Mum.)]. "
6. Similarly, in the case of Souvenir Developers India Private Limited (supra), the Tribunal held as under:-9
Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 "10. The submission that the agencies of the State Government are „clients‟ of the appellant on whose behalf maintenance of roads is undertaken appears to have overlooked the underlying scheme of the tender which brought the appellant in to the transaction. The contractual arrangement between the appellant and the agencies of the State was for undertaking collection of „toll‟ or „user fee‟, as the case may be, while also ensuring maintenance of roads in the condition in which these were handed over. These may, at best, be perceived as rendering service to these agencies of the State, and with „user‟ of the road as nothing but statistical probability when their bid was made and accepted, having no other intended recipient. Even this restricted depiction is founded solely on the fitment of the statutory definitions of the taxable service on to the commercial definitions employed in the contract without delving into the scheme. It is moot if, in the determination of tax liability, the commercial expressions deployed in a contract should be so construed, as the adjudicating authority has, without scrutinizing the context of the entirety of the contract for fitment within the charging provision of the statute.
xxxxxx xxxxxx xxxxxxx xxxxxxxx
15. We fail to perceive the authority under which the impugned order has concluded that, with effect from 1st July, 2012, the activity enumerated in the „negative list‟ in Section 66D of Finance Act, 1994 is restricted to the State and to agencies of the State. The exclusion of „(h) service by way of access to road or abridge on payment of toll charges;‟ in Section 66D of Finance Act, 1994 does not bespeak any such restriction on the provider of service. Therefore, there can be no controversy on the immunity from tax for the period after 1st July, 2012 merely from transfer of responsibility for collection to the appellant.
16. Adjudication should have been limited to taxability arising from rendering „commission agent‟ service without venturing also to emplace the activity of the appellant under other enumerations that fall within the definition of the said service. The impugned proceedings has not appreciated the nature of the contract and, having limited itself to superficial determination with reference to random phrases, has overlooked the substantive difference in risk assumption that is the key to „principal-principal‟ transaction. The circular of Central Board of Excise & Customs has been assigned undeserved emphasis and the exclusion by way of „negative list‟ has been improperly construed by the adjudicating authority. For these reasons, the impugned order is set aside and the appeal allowed."
7. In addition, the Tribunal in the case of Premier Car Sales Limited (supra), observed as under:-
"21. Appellants have vehemently contended that the collection of toll charges in terms of contract with NHAI falls in negative list under section 66D (h) of Finance Act, 1994.10
Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 They also contended that they have collected toll charges in its independent capacity as a contractor. It obtained right to collect toll under a contract. It has neither rendered any service to NHAI nor has acted as commission agent for NHAI, Payment had been received from vehicle owners and not from NHAI. Negative list entry under section 66D (h) reads as under:-
"66D Negative list of services - The negative list shall comprise of the following services namely -
a to g h service by way of access to a road or a bridge on payment of toll charges."
22. We find that the aforesaid issue relating to liability for payment of service tax on collection of toll charges under a contract with NHAI is no more res integra. This issue has been dealt with by this Tribunal in series of cases.
23. In the case of Sangam India Ltd. Vs. CCE reported in 2023 (73) G.S.T.L. 87, the Tribunal referred to the contract with NHAI and held that Appellants were not liable for payment of service tax on collection of toll charges. It allowed the appeal after making following observations:-
"We find that the allegation that the appellant worked as a 'Commission Agent" on whose behalf he collects the toll, appears to have overlooked the underlying scheme of the tender which brought the appellant into this transaction. The contractual arrangement between the appellant and NHAI was for undertaking the collection of toll or user fee. The terms of the contract was very clear possession of the Kanwaliyas. Toll Plaza asset is transferred to the appellant for the stream of lump sum payment guaranteed by the appellant. Any deficit returns owing to decreased vehicular traffic or any other reason affects the revenue steam of the appellant. A 'Commission Agent' is akin to a channel partner in delivery of goods/service, wherein the Principal bears all the risks. In the instant case, the tax liability does not arise by way of being commission Agent as per Section 65 (19) of the Finance Act, 1994 for the period prior to introduction of negative list regime".
24. Similarly in the case of Commissioner of Service Tax Vs. Ideal Road Builders Pvt. reported in 2018 (12) G.S.T.L. 192, the Tribunal rejected the Departmental appeal after holding that the activity of toll collection by the respondent was not on behalf of NHAI/MSRDC but on their own account, they have secured the right to collect the toll. Relevant portion of the order reads as under:-
"We have carefully considered the submissions 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 11 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 NHAI/MSRDC was in no way connected with the collection of toll or quanturn 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 year 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 that the respondents has been providing auxiliary service to any business".
"4.2. 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 tall 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 installment 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 12 Service Tax Appeal No. 50130 Of 2022 Service Tax Appeal No. 50132 Of 2022 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-S.T., dated 22-2-2012 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."
25. We find that Appellants' case is squarely covered by the aforesaid decisions of the Tribunal. We therefore set aside the demand on toll collection and allow the appeal on this issue. Issue No.4 Demand of Service tax Rs.4.26 crores on other taxable services for the period 2015-16 and 2016-17."
8. We find that the present issue stands squarely covered by the decisions mentioned above. Accordingly, we set-aside the impugned order and allow the appeals.
(Dictated & Pronounced in the open court) (BINU TAMTA) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) G.Y.