Collection of adda-fee under a State concession is not Business Support Service absent contractual nexus.

The Appellant was engaged by the Government of Punjab/PUNBUS as a management contractor for the operation and maintenance of bus terminals at Nawanshahar and Moga.

The Department alleged that the Appellant’s activities, including collection of “adda-fee” from bus operators, constituted “Support Services of Business or Commerce” and were taxable under the Finance Act, 1994.

A show-cause notice dated 24 February 2012 invoked the extended limitation period and proposed service-tax demand for December 2006 to September 2011.

By Order-in-Original dated 30 January 2014, the Commissioner confirmed service tax of ₹24,81,931 under Section 73(1), with interest under Section 75, and imposed penalties under Sections 77 and 78 of the Finance Act, 1994.

The Appellant contended that it operated public infrastructure under a State concession arrangement, collected adda-fee at Government-prescribed rates, and had no contractual relationship with the individual bus operators.

Whether the Appellant’s operation and maintenance of bus terminals and collection of adda-fee constituted “Support Services of Business or Commerce” taxable under the Finance Act, 1994?

Whether the extended period of limitation under Section 73(1) of the Finance Act, 1994 was invocable against the Appellant?

The Tribunal applied Sections 73(1), 75, 77 and 78 of the Finance Act, 1994 concerning recovery of service tax, interest and penalties.

It held that service tax is a contract-based levy requiring examination of the contractual relationship between the service provider and the recipient.

Relying on Rohan and Rajdeep Infrastructure Pvt. Ltd. v. CCE & ST, Ludhiana, 2026 (2) TMI 236 (CESTAT Chandigarh), the Tribunal held that collection of adda-fee under a State concession agreement, in the absence of a direct contractual relationship with bus operators, does not constitute “Business Support Service”.

It also relied on Commissioner of CGST, Chennai v. Wunderbar Films Pvt. Ltd., 2024 (3) TMI 17 (Madras), for the principle that service-tax liability must be determined from the specific contract between the parties, and on Mohit Minerals Pvt. Ltd., 2020 (33) GSTL 321 (Gujarat), for the proposition that service tax is a contract-based levy dependent upon the agreement between the supplier and recipient.

The Tribunal further noted that bus terminals are public-utility infrastructure and that adda-fee may, at most, bear the character of parking fees rather than consideration for business-support services.

The Appellant’s operative contractual relationship was with the Government of Punjab/PUNBUS, not with the individual bus operators.

Applying the contract-based nature of service tax, the Tribunal found no agreement under which the Appellant undertook to provide business-support services to the bus operators.

At the time of entering into the State concession arrangement, the bus operators were not identified contractual recipients, and the bus terminals were established as public-utility infrastructure rather than specifically to support the commercial businesses of those operators.

The adda-fee was collected pursuant to the Government-authorised arrangement and was not a commercially negotiated consideration for services supplied by the Appellant to the bus operators.

The Tribunal therefore held that the ratio of Rohan and Rajdeep Infrastructure squarely applied.

Having allowed the appeal on merits, it found it unnecessary to adjudicate the limitation issue.

The impugned Order-in-Original confirming service tax of ₹24,81,931, interest and penalties under Sections 77 and 78 was set aside, and the appeal was allowed on merits.

The limitation issue was left undecided.