Whether vehicles used for transportation of RMC are covered under GTA service and whether service tax is payable on reverse charge ?

PJ-Case law-2012/13-1570

Case:-BIRLA READY MIX VS COMMISSIONER OF CENTRAL EXCISE, NOIDA

Citation:-2013 (30) S.T.R. 99 (Tri. - Del.)

Brief facts:-The appellant is engaged, in manufacturing Ready Mix Concrete ("RMC" for short). They had hired "Transits Mixers", that is, vehicles specially designed for carryings RMC from place of manufacture to place of delivery of the goods. The vehicles were provided by the owners to the appellant for their use as per terms of a contract. The appellant paid consideration to the vehicle owners which involved certain payments on monthly basis and certain payments based on the number of kilometers run. Revenue demanded tax on the consideration paid by the appellant to the vehicle owners, considering it as a consideration for services of "Goods Transport Agency" received by the appellants since in the case of such service tax is to be paid by recipient of service.

Appellant’s Contention:-The counsel for the appellant submits that the transporting activity is done by the appellant themselves and was for delivering their product at the premises of the buyers. The counsel states that they were not issuing any consignment note and hence they could not be considered as "Goods Transport Agency". He contends that the activity was one of taking vehicle on lease. Such services became taxable under the head for "supply of tangible goods" from 16-5-2008 and therefore these cannot be held for any demand for service tax for the period prior to that.He further submits that the nature of activity involved in contracts of the same nature was before the Hon. High Court of Andhra Pradesh, in the case of G.S. Lamba and Sons v. State of A.P. reported at(2011) 43 VVST 323 (A.P.) or MANU/AP/0080/2011, decided on 28-1-2011. In that case the State Sales Tax Department of the state of Andhra Pradesh was proposing to levy sales tax on the activity arguing that the activity amounted to transfer of right to use transit mixers. The party contested that the activity was one of providing services of transport. The High Court rejected the argument of that party in that case and decided that the activity amounted to transfer of the right is use of goods.

Respondent’s Contention:- The learned AR for Revenue submits that the payments to the operators (that is of transit mixers) was linked to kilometres run by the vehicles. Further the operators were responsible for delivering the goods to consignees and to get their acknowledgement. The operators maintained log books showing details of consignments, consignees etc. and such record is equivalent to consignment note.

Reasoning of Judgment:-We have examined the terms of the contract. The contract is for hiring of vehicles. The vehicle are to be painted as directed by the appellant and showing appellants logo. The main responsibility of the supplier of vehicles is to ensure the availability of the vehicles in time and in proper condition. The agreement does not demonstrate that the operator has any special rights or responsibility about the goods as is the case of goods entrusted to a Goods Transport Agency. This obviates the need to issue consignment notes which normally is a document of title for the goods when it is in the custody of the transporter. There is one clause to the effect that the operator will obtain proper receipts from customers after the goods are delivered. Thus by itself cannot make the contract to be that of "Goods Transport Agency" as defined in Section 65(50b) of Finance Act, 1994. After Studying the Clauses of the Contract showing that this is a case where the operator was responsible only for the vehicle and there is no custodial rights or responsibilities in matter of goods carried. Since the appellants are responsible for the goods transported, consignment note, which is a document of title to the goods, is not issued. When consignment notes are not issued by the operator they cannot be considered as a "Goods Transport Agency". In this context we have also considered the provision in Rule 4A and also Rule 4B of Service Tax Rules, 1994 which stipulate that every "Goods Transport Agency" shall issue consignment note. This provision read with Section 65(50b) of Finance Act, 1994 as quoted above leads to a situation where the definition is dependent on a requirement laid down using the defined term itself and leads to difficulties in proper understanding of the matter. Since the provision of Act has to prevail we understand the definition at Section 65(50b) has to be understood independent of Rule 4B of Service Tax Rules, 1994 to decide whether the person concerned is a goods transport agency by adopting ordinary meaning of consignment note and then apply Rule 4B of Service Tax Rules, if the person concerned is found to be a goods transport agency. We further note that service tax is levied on the services of a "Goods Transport Agency" and not on services of a "Goods Transport Operator". The latter term was used in Finance Act, 1994 during the period Nov., 1997 to June, 1998 and the former expression is being used now. So it is to be understood that these two expressions refer to different types of persons. The mere fact that the operator is doing activity of transportation cannot make the operator a "Goods Transport Agency". So the operators in this case cannot be considered as "Goods Transport Agencies". We are not in agreement with the argument of Revenue that the log-book maintained by the operators should be considered as equivalent to consignment note. The fact that part of the hire charges for the vehicles is being paid on the basis of number of kilometers run cannot alter the nature of the responsibility of the operators because such payment is consistent with a scheme of hiring the vehicle though it may be consistent with a contract for transportation of goods also. On the other hand a fixed charge per month for the vehicle is more consistent with a scheme of hiring the vehicle rather than a contract hr transporting the goods. It is seen the contracts provide for such component of remuneration also. Further this issue is already examined by the Andhra Pradesh High Court in the case of G.S. Lamba and Sons (supra) though in the context of State Sales Tax. The Court has held that this type of contract is one for transfer of right to use the vehicle rather than for providing service of transportation. We do not find any reason to take a different view while examining the present matter which is in the context of service tax levy. Therefore, we set aside the impugned orders to allow the appeals.

Decision:-Appeals allowed.

Comment:- The essence of this case is that for leviability of service tax under GTA service, consignment note is to be issued necessarily and without any consignment note being issued, it is difficult to cast a liability on the transporter for the custody or responsibility for goods. Accordingly, mere hiring of transportation vehicle cannot be held to be liable to tax under GTA service.

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PJ-Case law-2012/13-1570

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