Supreme Court drops a Bombshell - Board Circulars not binding!

IT is now almost settled law that the Circulars and Instructions of the Board are binding on the subordinate officers of the Board, but in a recent judgement, the Supreme Court observed, "In our view, the departmental circulars are not binding on assessee or quasi judicial authorities or courts."

Now, is this an obiter dictum or a binding decision? If the Departmental Circulars are not binding on anyone, what would be the purpose of those circulars?

In Commissioner of Central Excise vs Ratan Melting & Wire Industries - 2008-TIOL-194-SC-CX-CB, a Constitutional Bench of the Supreme Court held,"Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law."

Certainly, that decision of the five-judge bench of the Supreme Court will prevail over the present two-judge bench decision.

Please see Breaking News for the latest Supreme Court Judgement.

Toll in nature of `user charge' or `access fee' paid by roads users - No Service Tax

A clarification was sought from the Board regarding leviability of service tax on toll fee paid by users, for using the roads.

Board clarifies:

++ Service tax is not leviable on toll paid by the users of roads, including those roads constructed by a Special Purpose Vehicle (SPV) created under an agreement between National Highway Authority of India (NHAI) or a State Authority and the concessionaire (Public Private Partnership Model, Build-Own/Operate-Transfer arrangement). `Tolls' is a matter enumerated (serial number 59) in List-II (State List), in the Seventh Schedule of the Constitution of India and the same is not covered by any of the taxable services at present. Tolls collected under the PPP model by the SPV are collection on own account and not on behalf of the person who has made the land available for construction of the road.

++ However, if the SPV engages an independent entity to collect toll from users on its behalf and a part of toll collection is retained by that independent entity as commission or is compensated in any other manner, service tax liability arises on such commission or charges, under the Business Auxiliary Service

++ An SPV formed as a result of agreement between NHAI or State Authority and the concessionaire under the BOT arrangement, cannot be considered as an agent of the NHAI. Renting, leasing or licensing of vacant land by the NHAI or State Authority to an SPV for construction of road and such construction do not attract service tax.

Incidentally, in the revised negative list circulated by the Board, Sl. No. 20 is " Tolls except services in relation to collection of tolls ".

There are several cases pending at various stages on this issue. Board should instruct the field to get all those cases closed – if the instructions can be implemented.

CBEC Circular No. 152/3 /2012-ST, Dated: February 22, 2012