Whether the transportation of goods by means of hired vehicles such that no consignment note is issued, would fall under the category of Goods Transport Agency Service?

Case:DINSHAWS DAIRY FOODS LTD. Versus COMMISSIONER OF C. EX., NAGPUR

Citation:2018 (13) G.S.T.L. 170 (Tri. - Mumbai)

Issue:   Whether the transportation of goods by means of hired vehicles such that no consignment note is issued, would fall under the category of Goods Transport Agency Service?

Brief facts:The facts involved in the present appeals are that the Appellant is engaged in manufacture of Ice Cream falling under Chapter 21. They are clearing their goods to distributors/dealers all over the country by specialized refrigerated Vans. They entered into agreement with the owners of such van to hire their Vehicles on hire charges at a fixed rate based on kilometer basis. The Vehicles were under the disposal of the Appellant and were transporting goods as per Appellant’s instructions. The demand of service tax was made on the ground that the Appellant had paid transportation charges to such vehicle owners but did not discharge the service tax liability under the category of “Goods Transport Agency”. Accordingly show cause notices were issued to the Appellant demanding service tax under the category of ‘Goods Transport Agency’. The demands were confirmed by the adjudicating authority on the ground that the service involved is liable to be taxed as Goods Transport Agency. The Appellate Commissioner upheld the adjudication order. Hence these appeals were filed by the Appellant.

Appellant’s contention:Shri D.H. Nadkarni, Ld. Advocate appearing for the Appellant submits that as apparent from the facts of the case they hired vehicle on per kilometer basis and the vehicles were under their control and disposal. No consignment note was thus prepared and the bills were raised by the Vehicle owners on the basis of monthly kilometers travelled by the Van. That in order to categorize the above incidence as of Goods Transport Agency, it has to be shown that any consignment note was issued by the service provider whereas in the present ease no consignment note was issued which is the requirement for classification of service. He relies upon the Tribunal’s order in following cases :
(i)        Bhima SSK Ltd. - 2017-TIOL-2693-CESTAT-MUM.
(ii)       South Eastern Coal Fields Ltd. - 2017 (47) S.T.R. 93
(iii)      Ultratech Cement Ltd. - 2017-TIOL-2714-CESTAT-MUM.
He also submits that since the refrigerated trucks were given on hire on monthly basis by individual owners therefore such activity cannot be termed as of Goods Transport Agency but of “transfer of right to use” and treated as deemed sale within the clause (29A) of Article 366 of the Constitution. He relies upon the judgments in case of Gimmco Ltd. - 2017 (481) S.T.R. 476 (Tri.) and G.S. Lamba & Sons - 2012-TIOL-49-HC-AP-CT = 2015 (324) E.L.T. 316(A.P.).

Respondent’s Contention:Shri Rishi Goel, Ld. Additional Commissioner (AR) appearing for the Revenue submits that the Appellant in their grounds of Appeals has taken the only ground that the individual truck owners cannot be called Goods Transport Agency. The other ground was not mentioned. That ground of non-issue of consignment note was not part of the Appeal memorandum and thus an additional ground could have only been raised by miscellaneous application which has not been done. The Revenue was not put to notice of the additional ground and thus the Appeal itself is liable to be rejected on this ground alone. He further submits that the non issue of consignment note cannot be a ground to hold that the Appellant is not liable for service tax under the category of Goods Transport Agency. That the judgment in case of Bhima SSK (supra) was given relying upon the order in case of M/s. Nandganj Sihori Sugar Co. Ltd. - 2014 (34) S.T.R. 850 (Tri.) wherein the facts were that the freight was on average rate and not on actual basis and adjustment of the fare of the transporter from amounts payable by the Sugar mills to the farmers. In case of Southern Coal Fields the consignor and consignee were same and hence distinguishable. In the present case the charges are on the basis of actual kilometer and the consignor and consignee are different. The details of the monthly invoices contain the vehicle number, date of transportation, destination of consignment and the actual kilometres which have been travelled. Thus the monthly invoice has got all the basic details as required in consignment note. Mere assertion that consignment note is not given cannot be accepted without examination. That non compliance with the legal provisions or the procedural requirements cannot take away the responsibility of paying taxes and no reliefs can be claimed or granted on account of such defaults of compliances or claiming relief on these grounds as held in case of Maddi Venkatraman & Co. P. Ltd. v. CIT - 1989 SC 563 and M/s. ACER India Ltd. - (2004) 8 SCC 173 = 2004 (172) E.L.T. 289 (S.C.). He relies upon the Board Circular No. 95/6/2007-S.T., dated 11-6-2007 read with Circular No. 97/8/2007-S.T., dated 23-8-2007 that the consignment note means any document issued by the goods transport agency against the receipt of goods for the purpose of transport of goods 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 the goods are transported, details of the goods transported, details of place of origin and destination , person liable for paying service tax whether consignor, consignee or the goods transport agency. That the manner of representation and inclusion of various details on the document culled as consignment note can have a liberal interpretation to suit the requirements of a particular industry or business practice. He also relies upon the order of Tribunal in case of S.V.R Selam Electricals Pvt. Ltd - 2016 (43) S.T.R. 574 (Tri.), Suibramania Siv Co.-Op. Sugar Mills Ltd. - 2014 (35) S.T.R. 500 (Mad.), Shree Balaji Transport - 2015 (38) S.T.R. 651 and Coromandel Agro Products - 2014 (33) S.T.R. 660 to state that the individual truck owners also fall under the category of Goods Transport Agency.

Reasoning of Judgement: The Appellate Authority find that the Appellant has hired the vehicles on the kilometres basis and monthly bills are raised on the basis of Kilometres travelled by the Vans. In such case when the vehicles are hired on monthly basis and the charges are not based upon destination but on kms basis, it cannot be said that the services involved are of Goods Transport Agency. Therefore in such case no consignment note is issued as the vehicles run on the direction of Appellant. The charges are fixed not on the basis of destination or quantity of goods or any other basis but solely on kms the vehicles have run in a month. Obviously no consignment note is issued as the services is not of consignment to be taken to any particular destination and therefore the services would not fall under the category of Goods Transport Agency. The Appellate Authority agree to the submission made by the Learned Counsel that the issue is now squarely covered by the judgment of the Tribunal in the case of South Eastern Coalfields Ltd. v. CCE, Raipur - 2017 (47) S.T.R. 93 (Tri. - Del.). The Appellate Authority respectfully reproduce the relevant paragraphs :
The Appellate Authority have heard both sides and examined the appeal records. As noted earlier, the Tribunal vide Final Order dated 13-8-2014 held that issuance of a consignment note is non-derogable ingredient to fulfill the definition of Goods Transport Agency. The matter has again come up for passing a detailed order as directed by the Hon’ble Chhattisgarh High Court.
The admitted facts are that the appellants engaged various transporters/contractors for moving coal from pithead to railway sidings. These contractors do not issue ‘consignment note’ to the appellant. The appellant had issued, slips with a view to keep the track of the goods for onwards transportation. The Appellate Authority have perused one such slip which is issued at the loading point. The serial numbered form contained certain details like weight, date, etc. The admitted fact is that the consignor and consignee are one and the same and transporter of goods is not issuing any consignment note. In such a situation, the original authority quoting “letter and spirit of the statute” observed that by not issuing consignment note the transporter had violated the provision of Rule 4B of the Service Tax Rules, 1994. The Appellate Authority find that the reasoning followed by ld. Commissioner is devoid of merits. It is relevant to examine the concerned legal provisions :
Section 65(105)(zzp) of the Act defines the taxable service as under :
(zzp) to any person, by a goods transport agency, in relation to transport of goods by road in a goods carriage;
Section 65(50b) of the Act defines ‘goods transport agency’ as under :
(50b) ”goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;
It is clear that to be called “goods transport agency” a person should fulfill two conditions, namely, he should provide service in relation to transport of goods by road and issue consignment note, by whatever name called. In the present case, admittedly, no consignment note was issued by the goods transporter. The original authority held that the slip/challans issued for monitoring purposes by the appellant (receiver of service) will satisfy such conditions and tax liability can be upheld. The Appellate Authority are unable to understand or appreciate such reasoning. The original authority is creating an amalgamation of service provider and recipient to fit in the definition of Goods Transport Agency. In other words, the transport of coal is done by the transport contractor which satisfied the first condition but no consignment note being issued. The slip issued by the appellant as recipient of service is taken with such activity of transport to bring in tax liability. The Appellate Authority find that such attempt is beyond the scope of law and without merit.
The matter has come up for decisions on earlier occasions by the Tribunal in Nandganj Sihori Sugar Co. Ltd. and Others v. C.C.E, Lucknow - 2014 (34) S.T.R. 850 (Tri.-Del.), it was held that the Goods Transport Agency in terms of its definition under Section 65(50b) provides services in relation to transportation of goods and issues consignment note which should have particulars as prescribed in Explanation to Rule 4B.
In cases where admittedly no consignment notes have been issued, the said transporter cannot be called Goods Transport Agency. In Birla Ready-mix - 2013 (30) S.T.R. 99(Tri.-Del.). it was held that the provisions of the Act has to prevail and the definition at Section 65(50b) has to be understood independent of Rule 4B of the Service Tax Rules, 1994 to decide whether the person concerned is a goods transport agency.
In Northern Coalfields Limited v. C.C.E., Bhopal vide Final Order No. 53313/2015, dated 29-10-2015, an identical situation was examined by the Tribunal. There also, the payment slips were generated by the service recipient containing relevant particulars like truck number, weight, etc., for monitoring and paying contractors for their service. No consignment notes were issued by the transporter. The Tribunal held that as no consignment note as generally understood or delineated in Rule 4B was issued by the transporter to the appellant in the transaction the tax liability under GTA does not arise.
Ld. Counsel for the appellant also contested the demand on the question of time-bar. He submitted that the Board issued a draft Circular on 9-10-2006 regarding service tax liability on various activities in open cast mines. One issue in draft circular in transportation of coal from pithead to railway sides and its tax liability under GTA. The Board opined that such movement of goods within the premises of mines may not be covered under taxable service as there is no consignment note for such transportation. However, later when Final Circular was issued on 12-11-2007 there was no clarification on this issue by the Board. Ld. Counsel submitted this fact to emphasis that this was a clear case of interpretation regarding tax liability during relevant time. Hence, there can be no allegation of suppression of fact, etc., to invoke the extended period of limitation against the appellant. He submitted that on this ground alone substantial demand will be hit by time-bar.
On careful examination of the issue as discussed above, The Appellate Authority find that tax liability under Goods Transport Agency service cannot be sustained against the appellant. The ratio laid down by the Tribunal in various decisions discussed above are to be followed as there is no reason to differ with the same. The Appellate Authority also noted that appellant is correct regarding their contention on the issue of interpretation with reference to time-bar of the demand also.
In view of the above, The Appellate Authority finds that the impugned order is not sustainable and accordingly set aside the same. The appeal is allowed.
Thus following the ratio of above decision wherein the Tribunal has held that in absence of consignment note services cannot be considered as GTA Service and from the facts emanating from the present case, The Appellate Authority hold that the demand of service tax under the category of “Goods Transport Agency” does not sustain. The Appellate Authority thus set aside the impugned order and allow all the appeals with consequential reliefs, if any.
Decision: The appeal is allowed in favour of applicant.
Comment: The kernel of the case is, the applicant is a manufacturer of ice creams. They are clearing their goods all over the country by specialized refrigerated vans. The appellant entered into an agreement with owners of such van to hire their vehicles on hire charges at a fixed rate based on kilometer basis.
However, no consignment note was issued as the vehicles run on the direction of appellant and service is not of consignment to be taken to any particular destination and therefore the services would not fall under the category of Goods Transport Agency. As when, the vehicles are hired on monthly basis and the charges are not based upon destination but on kms basis, it cannot be said that the services involved are of goods transport agency. Hence, the appeal was allowed in favour of applicant.
Prepared by: Prateeksha Jain

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