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2022 (5) TMI 868 - CESTAT MUMBAITaxability - business auxiliary service - submission is 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 - HELD THAT:- ‘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. 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 - 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. 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. Appeal allowed.
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