Whether the service of transportation of goods to sugar factory provided without a consignment note can be leviable to service tax?

PJ/CASE LAW/2016-17/3215

Case-BHIMA SAHAKARI SAKHAR KARKHANA LTD. Versus COMMR. OF C. EX., PUNE-III

Citation-2016 (41) S.T.R. 438 (Tri. – Mumbai)

Brief Facts-Relevant facts that arise for consideration are that during scrutiny of appellant’s records by the departmental officers for the financial years 2004-05 and 2005-06, it was noticed that appellant had paid inward freight. Revenue authorities entertained a belief that from 1-1-2005 as per Notification No. 35/2004-S.T. the consignee or the consignor covered under any of the seven categories mentioned in Notification was required to discharge service tax under the category of Goods Transportation Agency; appellant being a factory had failed to pay service tax on the said inward freight by them. Accordingly, a show cause notice was issued for recovery of the service tax, interest thereof and also proposing for imposing penalties. Adjudicating authority after following the due process of law confirmed the demands with interest and also imposed penalties. Appeal preferred against such order-in-original also met with the same fate, as the first appellate authority vide impugned order, upheld the order-in-original.

Appelants Contention-Learned advocate brings to our notice that the appellant has been taking a stand that they being a sugar manufacturing co-operative Unit, amounts paid by them are for combined expenses of harvesting, loading and transportation of sugarcane to the sugar factory and the entire charges are reflected as harvesting and transport charges. Accordingly, service tax liability could not arise on them. It is also his submission that the transportation charges which are paid by the appellant are mostly in respect of bullock cart charges and transportation of sugarcane to individual truck owners. It is his submission that the ratio of the judgment of the Tribunal in the case of Nandganj Sihori Sugar Co. Ltd. v. CCE, Lucknow - 2014 (34)S.T.R.850 (Tri.-Del.) would cover the issue in their favour.

Respondents Contention-Learned Departmental Representative on the other hand, would reiterate the findings of the lower authorities and submit that it is the case of Revenue that appellant has admitted as to their payment towards harvesting, bullock cart charges and transportation (inward freight) being paid to the farmers; having admitted that the appellant being a sugar factory is covered under the reverse charge mechanism Notification 35/2004-S.T. and is accordingly required to discharge the service tax liability.

Reasoning Of Judgement-On consideration of the submissions made by both sides and perusal of the records, it was found that the issue involved in this case is regarding service tax liability on an amount paid during the financial year 2004-05 and 2005-06 recorded as paid towards inward freight. Appellant herein is a sugar factory and is covered under the Notification 35/2004-S.T. as one of the categorized entities that has to discharge the service tax liability under the Goods Transport Agency on receipt of Services of Transport Agency.
On deeper perusal of the records, we find that appellant has been taking a stand that the amounts paid by them as inward freight was paid to owners of individual trucks and not to Goods Transport Agency. It is seen from the records this stand of the appellant is not controverted by Revenue in any way as also the stand that no consignment note is issued by truck owners. We agree to the submission made by the learned Counsel that the issue is now squarely covered by the recent judgment of the Tribunal in the case Nandganj Sihori Sugar Co. Ltd. (supra). We respectfully reproduce the relevant paragraph.
In terms of Section 65(105)(zzp), the taxable service means “any service provided to a customer, by a Goods Transport Agency, in relation to transport of goods by road in a goods carriage. “In terms of Section 65(50a) ibid ‘Goods Carriage’ has the meaning assigned to it in clause (14) of Section 2 of the Motor Vehicles Act, 1988. In terms of Section 65(50b), ‘Goods Transport Agency’ means any commercial concern which provides service in relation to transport of goods by road and issues consignment note, by whatever name called. The Service Tax has been demanded from the Appellants as service recipient under Rule 2(l)(d)(v) of the Service Tax Act, 1994 read with Notification No. 35/2004-S.T., dated 3-12-2004, on the payments made by them to transporters against the fortnightly bills being presented by them. While admittedly no consignment notes or GRs have been issued by the transports, according to the Department the Transporter’s bills are in the nature of the consignment notes. Under Rule 4B of the Service Tax Rules, 1994, “any Goods Transport Agency which provide service in relation to transport of goods by road in a goods carriage shall issue a consignment note to the customer. In term of Explanation to Rule 4B, ‘Consignment Note’ means - a document issued by Goods Transport Agency against the receipt of goods for the purpose of its transport by road in a goods carriage, which is serially numbered and contains the name of consignor and consignee, registration number of the goods carriage in which goods are transported, details of goods transported, details of the place of origin and destination, person liable for paying Service Tax whether consignor, consignee or Goods Transport Agency. Thus mere transportation of the goods in a Motor Vehicle is not the service provided by a Goods Transport Agency. A Goods Transport Agency in terms of its definition under Section 65(50b) provides service in relation to transportation of goods under a consignment note which should have the particulars as prescribed in explanation to Rule 4B. In the present case admittedly no consignment notes have been issued. The fortnightly bills cannot be treated as consignment notes, as a consignment note issued by Goods Transport Agency represent its liability to transport the consignment handed over to it to the destination and deliver the same to the consignee and merely a bill issued for transportation of goods cannot be treated as Consignment Note. The fact of non-issue of consignment to M/s. Nandganj is admitted in the show cause notice itself. In case of M/s. Bajpur though it is not mentioned in the show cause notice, this plea has been made by the Appellant and the same has not been refuted. The transportation of goods by individual truck owners without issue of consignment note, GR’s & billties, etc. as prescribed in Rule 4B of the Service Tax Rules, would be simple transportation and not the service of Goods Transport Agency which involves not only undertaking the transportation of the goods handed over to it but also undertaking delivery of the goods to the consignee and also temporary storage of the goods till delivery. When the transports did not issue consignment notes or GRs or Challans or any documents containing the particular as prescribed in Explanation to Rule 4B of the Service Tax Rules, 1994, the Transporters cannot be called “Goods Transport Agency” and, hence, in these cases, the service of transportation of sugarcane provided by the transporters would not be covered by Section 65(105)(zzp). In view of this we hold that there will be no Service Tax liability on the appellant sugarcane mills, as they have not received the service from a Goods Transport Agency. In view of this the impugned orders are not sustainable and the same are set aside. The appeals filed by M/s. Nandganj and M/s. Bajpur are allowed. As regards the Revenue’s appeal, since it has been held that there is no Service Tax liability of the Appellants, there would be no merit in it and the same is dismissed.”
In view of the facts and circumstances of this case and the authoritative pronouncement of the Tribunal, it was held that the impugned order is unsustainable and liable to be set aside and we do so.

Decision- Appeal is allowed.

Comment-In view of the above discussion it can be safely implied that freight paid to individual truck owners would not tantamount to services availed from goods transport agencies. GTA are required to issue consignments notes mandatorily which is not the case here. Thus the demand raised by the department was found to be unsustainable.

Prepared By- Praniti Lalwani

Comments

PJ/CASE LAW/2016-17/3215

Post a Comment

Query