No Service Tax On Adda Fees Collected At Amritsar Bus Terminal: CESTAT Chandigarh

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) on 3 February held that adda fees collected for the use of the Amritsar bus terminal are not liable to service tax.

The Bench, comprising Mr. S. S. Garg, Member (Judicial) and Mr. P. Anjani Kumar, Member (Technical), clarified that the entire bus-terminal constructed by the Appellant could not have been built to support the business of bus operators. Bus terminals are created as a public utility service and not as support services for bus operators; hence, service tax is not leviable under Business Support Services.

The Tribunal observed:

"....adda-fees are collected by the Appellant as per the agreement with the PIDB which authorizes the Appellant to collect the adda-fees in lieu of the investment made by the Appellant for developing the bus-terminal. At the most, these adda-fees are in the nature of parking-fees which are exempt under 'renting of immovable property services'........"

The ruling arose from a batch of six appeals filed by Rohan and Rajdeep Infrastructure Pvt. Ltd., which had entered into a Build-Operate-Transfer (BOT) concession agreement with the Punjab Infrastructure Development Board (PIDB) under the Punjab Infrastructure (Development & Regulation) Act, 2002, for the construction, development, operation, and maintenance of the Amritsar bus terminal.

Under the agreement, the appellant invested its own funds to build the terminal and, in lieu of monetary consideration from the State, was permitted to collect adda fees from bus operators at rates fixed by the State Government. Ownership of the terminal at all times vested with the Authority, and the assets were required to be transferred back to the State at the end of the concession period.

The Department alleged that the collection of adda fees constituted consideration for providing infrastructural and operational facilities to the bus operators in furtherance of their business and, therefore, amounted to a taxable "Business Support Service".

Allowing the appeals, the Bench held that service tax is a contract-based levy, and liability must be determined with reference to the contractual relationship between the service provider and the service recipient.

The Bench found that the “Appellant was, in fact, reimbursed the costs of the project by being permitted to collect the adda-fee, which is nothing but consideration payable by PIDB for the construction and development of the project."

The Tribunal noted that the only contractual relationship was between the appellant and the State Authority, and there was no privity of contract between the appellant and the bus operators, to whom the Department alleged services were rendered. The Bench held:

"The Appellant had no right or role to play in determination of the fees to be collected from the bus operators, and the same was at the sole discretion........"

The Tribunal further added:

".....instead of paying the costs of construction of a new bus-terminal, the Appellant was allowed to collect adda-fees mentioned in Schedule-II and other charges mentioned in Schedule-III; the concession agreement was governed by PIDR Act and adda-fee was fixed by the State Government; and the Appellant had no choice but to collect adda-fee at the prescribed rate......"

On the issue of limitation, the Tribunal held that the extended period was not invocable as the Department was aware of the appellant's activities since 2009 and had failed to establish suppression, misstatement, or intent to evade tax.

The Bench concluded that the “demand of service tax on adda-fees in the present case under the category of 'business support services' is not sustainable in law and is liable to be set aside."

Accordingly, the Tribunal allowed the appeals.

For Appellant: Senior Advocate, Prakash Shah, with Advocate, Naveen Bindal and C.A., Sagar Shah

For Respondent: Authorised Representatives, Anurag Kumar with Yashpal Singh