Service of loading/unloading consignment at intermediary stage is GTA service or separate service attracting service tax

PJ/CASE STUDY/2011-12/40

01 November 2012

PJ/Case Study/2011-12/40

CASE STUDY

Prepared By:
CA Pradeep Jain and
Sukhvinder Kaur LLB [FYIC]

Introduction:-

In the case under study, the service of loading/unloading/packing/unpacking/transshipping and warehousing in transit was provided by the assessee during the GTA service. Whether such service provided at an intermediary stage by arrangement with principal GTA service provider would amount to providing a separate and new service on which service tax becomes leviable? Or whether no separate service was provided and separate service tax imposed will lead to double taxation of same transaction? These issues were involved in the case under study.

M/s Kataria Transport Corp Ltd v/s CST, Delhi
[2011-TIOL-1664-CESTAT-DEL]

Brief Facts:-

- Appellant-assessee was providing service in the nature of loading/unloading/packing/unpacking/transshipping and warehousing in transit in respect of GTA services provided to transport of goods consigned for the origin to known destination. This service was provided as per arrangement between principal GTA service provider and intermediary service provider.

- Department alleged that the said service provided was GTA service and demand was raised against the appellant. The demand was confirmed.

- Appellant is in appeal before the Tribunal.

Appellant’s Contention:-

- Appellant contended that the service provided by them was GTA service as an intermediary. Such service was in the nature of loading/ unloading/packing/unpacking/transshipping and warehousing in transit in respect of GTA services provided originally to transport the goods consigned from the origin to known destination. Enroute services are also provided as per arrangement between principal GTA service provider and intermediary service provider to ensure the originally consigned goods reachable to its ultimate destination. The intermediary service neither being an independent one nor of a new character, that does not change the character of original GTA service.

- It was contended that the Authorities have not considered that no new service provided by the intermediary nor any independent service was provided while uninterrupted service was provided to same consignee in transit levied tax on the appellant. That when principal activity of GTA was taxable, then the demand followed by different consequences of law did not arise against the appellant.

- Reliance was placed on Notification No. 1/2009-ST dated 05.01.2009 and on Circular No. 104/7/2008-ST dated 06.08.2008 stating that intermediary transactions emanating from original transaction id immune from double taxation when the intermediary is not recipient of service.

- It was submitted that the Adjudicating Authority has not considered the law, since the notification and circulars were issued after the passing of the adjudication order. Such subsequent developments does not bring transit service provided on behalf of principal GTA to tax net. In view of the notification recognized and characterizing the intermediary service to be GTA service only without nature of the same being changed, there shall be no levy on the appellant.

- That the law applicable after passing of the adjudication order has been given proper recognition by the same authority in appellant’s own case vide Order-in-Original No. Ind/421&422/10 passed on 08.12.2010. Similar order is required to be passed in the present case also.

Revenue’s Contention:-

- Revenue submitted that legislation on the subject of GTA services has been appreciated by the Adjudicating Authority and he has passed appropriate order. Subsequent amendment, notification and circulars shall have no bearing when the appellant became a new service provider getting consideration for the service provider.

Reasoning of the Tribunal:-

- The Tribunal held that the notification and circulars cited by appellant including the order relied upon provide basis to ascertain status of the intermediary bringing nexus of the original GTA service provided with the consignee in respect of the origin of transaction and occasioning movement of the consignment to its destination through the intermediate appellant. If intermediary service is subservient to the original transaction, mere break of the original transaction in transit does not bring out a different transaction. It was stated that nature, character and terms of a contract decides incidence of tax of intermediate transaction. If the character of the service provided by intermediary in transit is GTA without the original transaction coming to an end, the service provided by an intermediary may not be construed to be a different transaction. But all intermediate transactions may not necessary be characterized as original transaction unless and until both transactions are integrally and indispensably related or connected to each other.

- It was held that the notification and circular may enable the authority to record finding testing true nature of the transactions made by the parties. Their contractual terms may decide incidence of tax. Making thorough verification of chain of evidence, consignment notes, origin and destination of the transaction, understanding of consignor and the consignee, contract of GTA service provider with intermediary, the authority below that come to a rational conclusion. It was directed that the Authority is required to be satisfied that the transaction has suffered tax at the appropriate stage in appropriate hand.

- Impugned order set aside. Matter remanded for verification that double taxation of he same transaction is not taking place.

Decision of the Tribunal:-

Appeal allowed by way of remand.

Conclusion:-

The Tribunal has remanded the matter by holding that if intermediary service is subservient to the total transaction, mere break of the original transaction in transit does not bring out a different transaction however, all intermediate transactions may not necessary be characterized as original transaction unless and until both transactions are integrally and indispensably related or connected to each other. Thus, it is the nature of service and the terms and conditions of the service provided is required to be examined before imposing service tax.

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PJ/CASE STUDY/2011-12/40
01 November 2012

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