2026-VIL-1055-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax Liability on Revenue Sharing from Railway Infrastructure Investment under Private Participative Investment Model – Appellant invested capital to construct and maintain a railway line connecting a port under the Ministry of Railway's Private Participative Investment Policy. The entity received, as return on investment, an apportioned share of 95% of freight collected by Indian Railways after deduction of operational costs and fees, termed as "User Fee" - Department contended that this constituted business support service rendered to Railways and demanded service tax - Whether the revenue sharing arrangement constitutes provision of Business Support Service attracting service tax liability – HELD - The transaction constitutes a Joint Venture or partnership arrangement between two parties whereby one party invests capital and resources to create infrastructure while the other party uses the same, collects revenue, and shares it to compensate the investor. Such revenue sharing arrangement does not establish a service provider-service recipient relationship as is essential for service tax. The agreement demonstrates that the appellant steps into the shoes of Railway Administration, the entire capital expenditure is borne by the appellant, and the 95% revenue sharing is merely a return of capital investment with reasonable profit rather than consideration for rendering service. The activities undertaken by a partner or co-venturer for mutual benefit of partnership or joint venture cannot be regarded as taxable service. The appellant's belief that no service tax is payable is bonafide, hence no suppression is established and the extended period of limitation is not applicable - The appeal is allowed both on merits and on the ground of limitation
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