Case Law Details
Usha Martin Limited Vs Commissioner of Central Excise (CESTAT Kolkata)
Introduction: In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Kolkata quashed a service tax demand related to cargo handling services in the case of Usha Martin Limited vs. Commissioner of Central Excise. The decision provides clarity on the classification of services and the application of service tax in cases involving a combination of services.
Detailed Analysis
1. Background: Usha Martin Limited (Appellant No. 1) and M/s Bhadoria Transport Company (Appellant No. 2) were involved in a contractual arrangement during which Appellant No. 2 provided services related to the transport of goods. These services included loading and shifting of materials from a private railway siding to a stacking yard. While Appellant No. 1 initially paid service tax under the category of Goods Transport Agency (GTA) service, the tax liability later shifted to the category of Cargo Handling Service at the direction of the Directorate General of Central Excise Intelligence (DGCEI).
2. Service Tax Demand: A show-cause notice was issued, alleging that the services provided by Appellant No. 2 fell under the Cargo Handling Service category instead of GTA service. The notice covered a period from October 1, 2004, to March 31, 2009. It accused Appellant No. 1 of evading service tax in connection with these services.
3. Appellants’ Argument: Appellant No. 2 contended that the primary service they provided was the transportation of goods, and other services such as loading and unloading were ancillary and integral parts of the main transportation activity. They argued that the composite service, including various ancillary activities, qualified as GTA service. The Appellants cited a circular from the Central Board of Excise and Customs (CBEC) dated August 6, 2008, which clarified that a combination of services should be classified as GTA service. They also referred to decisions by the Tribunal and the Supreme Court that upheld this view. The Appellants further claimed that the demands were time-barred.
4. Revenue’s Position: The Revenue supported the impugned order, asserting that the composite contract should not be dissected into separate components for classification. They argued that the primary provision was loading and unloading, making the proper classification Cargo Handling Service.
5. CESTAT’s Decision: The CESTAT examined the service contracts and concluded that the principal activity was the transportation of goods. While some contracts involved the loading and unloading of materials, the primary service was clearly transportation. Therefore, the CESTAT determined that the correct classification for the services in question was Goods Transport Service. As a result, the demand under Cargo Handling Service was considered unsustainable. The CESTAT set aside the entire demand and the associated penalties.
Conclusion: The ruling by CESTAT Kolkata in the case of Usha Martin Limited provides valuable insights into the classification of services, especially when a combination of services is involved. The decision highlights the importance of correctly categorizing services for tax purposes. In this case, the CESTAT’s judgment clarified that the primary activity, which in this case was goods transportation, should govern the classification of services. This ruling serves as a reminder of the need for precision in tax assessments and the significance of correctly determining the category of services provided.
FULL TEXT OF THE CESTAT KOLKATA ORDER
Both the appeals are arising out of a common order, therefore, both are disposed off by a common order.
2. The facts of the case are that M/s Bhadoria Transport Company (Appellant No.2) was in business of transport of goods and during the impugned period, the Appellant No.2 entered into a contract and received work orders from Appellant No.1, M/s Usha Martin Limited, Gam aria, Jharkhand. The works undertaken for Appellant No.1 was transport of goods along with loading and shifting of materials from the Private Railway Siding to Stacking Yard. The Appellant No.2 was carrying out the aforesaid services and registered themselves as provider of Goods Transport Agency (GTA) Services and the Appellant No.1 was paying the service tax under the category of GTA service. The Appellant No.1 paid the service tax until May, 16, 2008 and where after, as per DGCEI and on direction of Appellant No.1, the Appellant No.2 paid the service tax under the category of Cargo Handling Service. 2.1 Pursuant to investigation carried out by DGCEI, a show-cause notice dated 23.04.2010 was issued for the period 1st October, 2004 to 31st March, 2009 alleging that during the impugned period, the Appellant No.2 has provided the services of loading and unloading of railway wagons along with transportation in some cases under composite work orders received from Appellant No.1, which allegedly were taxable under Cargo Handling Service w.e.f. 01.01.2005 and not under GTA service to Appellant No.1, on which allegedly service tax was payable, but not paid, except to the extent stated in the show-cause notice and thereafter, the Appellant No.1 has allegedly evaded payment of service tax in contravention of the provisions of the Act by way of collusion, mis-statement etc. and thereafter, adjudication took place and the demand of service tax was confirmed against the Appellant No.1 and on Shri Dharamvir Bhadoria, Partner and penalty on the Appellant No.1 was also imposed.
2.2 Against the said order, the Appellants are before us.
3. The ld.Counsel for the Appellant No.2, submits that the service rendered by the Appellant No.2 to Appellant No.1, are correctly classifiable under GTA Service. He submits that from the work orders/contract, the main activity thereunder was the transportation of goods and other services, namely, loading and unloading, handling stacking and watching, were incidental to and formed an inextricable part of work of the main activity of transportation of the subject goods by road/rail through goods carrier. Therefore, the composite service, which consisted various ancillary services, such as, loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., is GTA service in terms of the clarification of CBEC Board by Circular No.104/07/2008-ST dated 06.08.2008. He also relied on the decisions of this Tribunal in the case of DRS Logistics Private Limited Vs. Commissioner of Service Tax reported in 2017 (7) GSTL 352 (T), which has been affirmed by the Hon’ble Apex Court as reported in 2018 (18) GSTL J172 (SC). He also submits that the demands are also barred by limitation.
4. On the other hand, the ld. Special Counsel for the Revenue, supported the impugned order and submits that the adjudicating authority has held that the composite contract should not be broken into its components and classified separately. Therefore, the main provision is loading and un-loading and therefore, the merits classification is Cargo Handling Service.
5. Heard both the parties and considered the submissions.
6. As per the work orders, the main activity is transportation of goods. One of the contract is extracted herein below for better appreciation :
On going through the said contract, the scope of the work is transport of their materials from Goods Despatch Yard to their Works issued by Appellant No. (1) to Appellant No. (2). It is clear from the works itself that the main activity of the Appellants is transportation of materials, not loading and un-loading and transportation is the main service.
7. In that circumstances, we hold that as the main activity of the appellants is transportation of goods, therefore, merits classification of the above said service in question is Goods Transport Service. Therefore, the demand under Cargo Handling Service is not sustainable, hence, whole of the demand confirmed against Appellant No.(2) is set aside and consequently, the penalty imposed on the appellants are also set aside.
8. In view of this, the appeals are allowed with consequential relief, if any.
(Operative part of the order was pronounced in the open Court)
