Adda Fees Collected at Bus Terminal Not Taxable as ‘Business Support Service’: CESTAT Chandigarh

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that adda fees collected at the Amritsar bus terminal cannot be taxed as ‘Business Support Services’ under the Finance Act, 1994. The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) ruled that the infrastructure developer was not providing any taxable service to bus operators, and that the adda fees collected were merely a mechanism to recover project costs under a concession agreement with the Punjab Infrastructure Development Board (PIDB). Rohan and Rajdeep Infrastructure Pvt. Ltd. had entered into a Build-Operate-Transfer (BOT) concession agreement with PIDB under the Punjab Infrastructure (Development & Regulation) Act, 2002 for the construction, operation, and maintenance of the Amritsar Bus Terminal. Instead of receiving monetary consideration from the State, the company was permitted to collect adda fees from bus operators using the terminal. The ownership of the terminal remained with the State at all times, and the entire infrastructure was to be transferred back to the government at the end of the concession period. The Department alleged that these adda fees constituted consideration for providing “Business Support Services” to bus operators and issued multiple show cause notices covering the period from October 2006 to March 2015, confirming tax demands along with interest and penalties under Sections 76, 77, and 78 of the Finance Act. The Department argued that the facilities provided at the bus terminal—such as parking, passenger embarkation and disembarkation, ticketing counters, and other amenities—directly supported the business operations of private transporters. Since these services allegedly facilitated the commercial activities of bus operators, the Department classified them as taxable business support services. The assessee countered that there was no contractual relationship between the company and bus operators. Adda fees were fixed and notified by the State Government, not by the assessee. The concession agreement was solely between the appellant and PIDB, making PIDB the only service recipient, if at all. Business Support Service applies only where services are outsourced by the service recipient, which was not the case here. The bus terminal was a public utility, not a commercial support facility for private businesses. The appellant relied on several judicial precedents, including earlier CESTAT rulings and High Court judgments, to emphasize that service tax is a contract-based levy and cannot be imposed in the absence of a service relationship. After examining the concession agreement, statutory provisions, and circulars issued by the Central Board of Excise and Customs, the Tribunal held no Business Support Service was rendered to bus operators, as there was no privity of contract between them and the appellant. The construction and operation of a public bus terminal cannot be treated as outsourced business support activity. Adda fees were merely a mode of reimbursement for the cost of infrastructure development permitted by the State. The definition of Business Support Service covers outsourced administrative or operational functions, which did not apply in this case. The reliance placed by the Revenue on the earlier decision in Prem Kumar Maini was misplaced, as that case involved operation of an existing terminal without any investment in new infrastructure and was factually distinguishable. The Tribunal also ruled that a substantial part of the demand was barred by limitation, noting that the Department was already aware of the appellant’s activities well before issuing the show cause notice. There was no evidence of suppression, fraud, or wilful misstatement, making invocation of the extended limitation period unsustainable. Consequently, all penalties imposed under Sections 76, 77, and 78 were also set aside. Allowing all six appeals, the CESTAT quashed the service tax demands, interest, and penalties in entirety, granting consequential relief to the appellant. Case Details Case Title: Rohan And Rajdeep Infrastructure Pvt Ltd. Versus Commissioner of Central Excise & Service Tax Case No.: Service Tax Appeal No. 55340 of 2013 Date: 03.02.2026 Counsel For Appellant: Prakash Shah, Sr. Advocate Counsel For Respondent: Anurag Kumar Click Here To Read Order Read More: CENVAT Credit Allowed on Construction-Related Services Used for Renting of Immovable Property: CESTAT

Adda Fees Collected at Bus Terminal Not Taxable as ‘Business Support Service’: CESTAT Chandigarh

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