Introduction: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chennai recently addressed the case of Ramco Cements Limited vs. Commissioner of Central Excise. The appeal pertained to a dispute regarding the liability of the appellant to pay Service Tax under the category of Goods Transport Agency (GTA) for transportation services provided by various contractors for the movement of limestone from mines to the factory. This article provides an overview of the case, a detailed analysis, and the CESTAT’s conclusion.
1. Background: The Revenue contended that the appellant had engaged various contractors to transport limestone from mines to their factory. They argued that this transportation service fell under the category of Goods Transport Agency (GTA) as per the relevant sections of the Finance Act, 1994.
2. Show Cause Notice: A Show Cause Notice was issued, alleging suppression of facts with the intent to evade payment of Service Tax. The notice covered the period from 2006-07 to 2010-11 and proposed the demand for Service Tax, along with interest and penalties.
3. Appellant’s Response: The appellant disputed their liability to pay Service Tax under the GTA category. They raised several key points to support their case, including:
4. CESTAT’s Decision: The CESTAT Chennai considered the appellant’s arguments and relied on previous decisions of various CESTAT Benches, as well as the order of the Hon’ble jurisdictional High Court of Madras. These decisions collectively supported the view that the issuance of consignment notes was a crucial element for being categorized as a Goods Transport Agency (GTA). Since the truck owners did not issue consignment notes and did not meet the GTA criteria, their services were not subject to Service Tax.
5. Judicial Discipline: The CESTAT emphasized the importance of judicial discipline and the need to follow consistent views expressed by co-ordinate benches. In light of the previous decisions and the High Court’s order, the CESTAT held that the demand for Service Tax, as confirmed in the impugned order, could not be sustained.
Conclusion: The CESTAT Chennai’s decision in the case of Ramco Cements Limited vs. Commissioner of Central Excise clarifies that transporters providing services in mines cannot be considered Goods Transport Agencies (GTAs) without the issuance of consignment notes. The CESTAT upheld the consistent view expressed by co-ordinate benches and the Hon’ble jurisdictional High Court, ultimately dismissing the Service Tax liability for the appellant. This decision underscores the significance of legal elements in determining tax liability and the need for adherence to established legal principles in tax assessments.
FULL TEXT OF THE CESTAT CHENNAI ORDER
It is the case of the Revenue, through the Show Cause Notice dated 20.04.2012, that during the course of audit of accounts, the assessee appeared to have engaged the services of various contractors for transportation of limestone from the mines to their factory which was covered under the category of Goods Transport Agency (GTA) under Section 65(105)(zzp) of the Finance Act, 1994 read with Section 65(50b) ibid. It is also their case that as per sub-rule 2(1)(d)(v) of the Service Tax Rules, 1994, the person liable for paying Service Tax on the transportation service provided by a GTA in cases where the consignor or consignee of goods falls under any of the seven sub-clauses under the said sub-rule, is the person who pays or is liable to pay freight for the transportation of such goods, which in the instant case having been made by the assessee, therefore, the assessee was liable to pay Service Tax.
1.2 It appears that the assessee furnished the details of freight paid to various contractors for transportation of limestone vide their letter dated 10.08.2011 which, according to the Revenue, had not been disclosed by the assessee in its S.T.-3 returns filed and that the same came to light only during the course of audit of the assessee’s accounts.
2. Entertaining a doubt that the above amounted to suppression with intent to evade payment of Service Tax for the above service, the above Show Cause Notice (dated 20.04.2012) came to be issued, for the period from 2006-07 to 2010-11, proposing, inter alia, to demand Service Tax along with applicable interest under Section 75 and penalties under Sections 76, 77 and 78 ibid.
3. The assessee, upon receipt of the Show Cause Notice, filed a detailed reply thereby seriously disputing its liability to Service Tax under GTA and also disputing the basic factual assumption insofar as transportation of limestone from mines to crusher / stock pit located within the mining area was concerned, on the following grounds:-
i. Commissioner of C.Ex. v. Gujarat Narmada Fertilizers Co. Ltd. [2009 (240) E.L.T. 661 (S.C.)]
ii. Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III [2009 (240) E.L.T. 641 (S.C.)]
iii. Ispat Industries Ltd. v. Commissioner of C.Ex., Raigad [2006 (199) E.L.T. 509 (Tri. – )]
iv. NRC Ltd. v. Commissioner of C.Ex., Thane-I [2007 (209) E.L.T. 22 (Tri. – )]
v. Chemicals & Fibres of India Ltd. v. Collector of C.Ex., Bombay [1988 (33) E.L.T. 551 (Tri.)]
vi. Akbar Badruddin Jiwani v. Collector of Cus. [1990 (47) E.L.T. 161 (S.C.)]
vii. Secretary, Town Hall Committee v. Commissioner of C.Ex., Mysore [2007 (8) S.T.R. 170 (Tri. – )]
viii. Commissioner of C.Ex., Jaipur-I v. Sikar Ex-Servicemen Welfare Co-op. Society Ltd. [2006 (4) S.T.R. 213 (Tri. – )]
ix. Haldia Petrochemicals Ltd. v. Collector of C. Ex., Haldia [2006 (197) E.L.T. 97 (Tri. – )]
x. Siyaram Silk Mills Ltd. v. Commissioner of Central Excise, Mumbai-II [2006 (195) E.L.T. 284 (Tri. – )]
xi. Fibre Foils Ltd. v. Commissioner of Central Excise, Mumbai-IV [2005 (190) E.L.T. 352 (Tri. – )]
xii. ITEL Industries Pvt. Ltd. v. Commissioner of C. Ex., Calicut [2004 (163) E.L.T. 219 (Tri. – )]
xiii. Commissioner of Central Excise v. Mega Air Tech Engineers [2009 (238) E.L.T. 35 (Guj.)]
4. The adjudicating authority / Commissioner having considered the reply of the appellant during adjudication, however, vide impugned Order-in-Original No. 20/2013-ST dated 23.12.2013 has confirmed the demands, as proposed in the Show Cause Notice, but has dropped the imposition of penalty under Section 76 alone.
5. It is against the demand in the said order that the present appeal has been filed by the assessee / appellant, before this forum; Revenue has not filed any appeal against the dropping of penalty by the Commissioner.
6. Shri R. Parthasarathy, Ld. Consultant, appeared for the appellant and Shri N. Satyanarayanan, Ld. Assistant Commissioner, defended the Commissioner.
7. Facts are not in dispute. The only short point that arises for our consideration is: whether the payment of freight attracted Service Tax levy under GTA, as confirmed in the impugned order?
8.1 The Ld. Consultant would submit, at the outset, that the transportation of limestone was undertaken by transport operators who were actually the owners of such trucks, with whom the appellant had directly entered into contract for transportation, such transport operators were not covered by the definition of GTA and hence, the appellant entertained a bona fide doubt that there was no liability to pay Service tax on the freights that were paid directly to such transport operators / truck owners.
8.2 Further, he would submit that such truck owners also did not issue any consignment note, which is also an essential ingredient of the definition of GTA under the statute, but however, the activity of transportation was executed as per the work orders issued to the respective truck owners.
8.3 He would also refer to the following orders of various CESTAT Benches to contend that the leviability of Service Tax under reverse charge mechanism in respect of transportation charges paid directly to truck owners has been settled in favour of the assessee: –
i. Commissioner of C. Ex. & Cus., Guntur v. Kanaka Durga Agro Oil Products [2009 (15) S.T.R. 399 (Tri. – )]
ii. Nandganj Sihori Sugar Co. Ltd. v. Commissioner of C. Ex., Lucknow [2014 (34) S.T.R. 850 (Tri. – )]
iii. Caps & Prints P. Ltd. v. Commissioner of S.T., Kolkata [2013 (30) S.T.R. 426 (Tri. – )]
iv. Lakshminarayanan Mining Co. v. Commissioner of S.T., Bangalore [2009 (16) S.T.R. 691 (Tri. – )]
v. M.B. Granites Pvt. Ltd. v. Commissioner of C. Ex., Salem [2010 (19) S.T.R. 437 (Tri. – Chennai)]
vi. Commissioner v. K.M.B. Granites Pvt. Ltd. [2013 (32) S.T.R. J205 (Mad.)]
vii. Mahanadi Coal Fields Ltd. v. Commissioner of C. Ex. & S.T., BBSR-I [2022 (57) G.S.T.L. 242 (Tri. – )]
viii. Dinshaws Dairy Foods Ltd. v. Commissioner of C. Ex., Nagpur [2018 (13) G.S.T.L. 170 (Tri. – )]
ix. Bhima Sahakari Sakhar Karkhana v. Commissioner of C. Ex., Pune-III [2016 (41) S.T.R. 438 (Tri. – )]
x. Ultra Tech Cement Ltd. v. Commissioner of C. Ex, Kolhapur [2018 (10) G.S.T.L. 80 (Tri. – )]
xi. South Eastern Coal Fields Ltd. v. Commissioner of C. Ex., Raipur [2016 (41) S.T.R. 636 (Tri. – )]
9. Per contra, the Ld. Assistant Commissioner relied on the findings in the impugned order.
10. We have heard the rival contentions and we have perused the order of the lower authority.
11.1 In the case of M/s. K.M.B. Granites Pvt. Ltd. v. Commissioner of C.Ex., Salem [2010 (19) S.T.R. 437 (Tri. – Chennai)] this Bench had an occasion to consider an almost similar issue of liability to Service Tax on services of GTA vis-à-vis Rule 2(1)(d)(v) ibid. After hearing both sides, this Bench has held as under: –
“3. Heard both sides. It has been consistently contested by the assessees that services were not being provided to them by the Goods Transport Agency but by individual truck owners/lorry owners. Before the lower appellate authority they have also provided written submissions in support of their above submission. It has been held by the Tribunal in the case of Lakshminarayana Mining Co. v. CST, Bangalore – 2009 (16) S.T.R. 691 (Tri.-Bang.) and in the case of CCE, Guntur v. Kanaka Durga Agro Oil Products Pvt. Ltd. – 2009 (15) S.T.R. 399 (Tri.-Bang.) that transport undertaken by individuals owning and operating lorry and trucks is not subject to service tax as in these cases services has not been provided by Goods Transport Agency Service. Following the ratio of the above decisions, I hold that the appellants are not liable to Service tax and imposition of penalty. I, therefore, set aside the impugned orders and allow these appeals.”
11.2 It appears that the Revenue filed an appeal before the Hon’ble jurisdictional High Court of Madras against the above order and the Hon’ble High Court vide its Order reported in 2013 (32) S.T.R. J205 (Mad.) has dismissed the appeal, thereby upholding the order of this Bench.
11.3 Further, we find that the other orders relied upon by the Ld. Consultant clearly confirm the view that the essential requirement is the issuance of consignment note in order to be covered under the definition of GTA and in the absence of the same, the transporters/contractors rendering transport services in mines cannot be said to be GTA and therefore, their service cannot be made amenable to the levy of Service Tax under the category of ‘transportation of goods by road’ service.
12. The above consistent view expressed by various co-ordinate benches of the CESTAT, judicial discipline demands to follow the said view of the co-ordinate Benches. This is also for the reason that in one of the cases, even the Hon’ble jurisdictional High Court has upheld the order of this Bench. Following therefore the same view, we hold that the demand of Service Tax confirmed in the impugned order cannot sustain.
13. Resultantly, we allow the appeal with consequential benefits, if any, as per law.
(Order pronounced in the open court on 27.09.2023)