Toll collection by contractor on fixed bid basis is principal-to-principal, not taxable service; covered by negative list S.66D(h).

HEMAMBIKA R. PRIYA 

The present appeals have been filed by M/s Dep Tolls LLP, appellant No. 1 2 appellant No. 2 and Ajay Agrawal, 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 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 Builders Pvt. Ltd., 2018 (12) GSTL 192 (Tribunal Mumbai) 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