CESTAT, NEW DELHI BENCH
Birla Ready Mix
Commissioner of Central Excise
FINAL ORDER NOs. ST/A/604-605/12-CUS
Appeal nos. st/105 of 2010 and 30 of 2011
Date of Pronouncement :- 21.09.2012
Mathew John, Technical Member
In these proceedings two appeals filed by the same appellant on the same issue are being considered together. The details of the appeals are as under:
Tax demand confirmed
|January,2005 to March 2007||
|April, 2007 to February, 2008||
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2. The appellant is engaged, in manufacturing Read 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 kilometres 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 services tax is to be paid by recipient of service. 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 “Good Transport Agency”. He contends that the activity of was one of telling vehicle on lease. Such services became taxable under the head for “supply of tangible goods” from 16-05-08 and therefore these cannot he any demand for service tax for the period prior to that.
3. 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 & Sons v. State of A.P.  35 STT 248. 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 right is use.
4. The ld A.R. for Revenue submits that the payments to the operators that is where 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 acknowledgment. The operators maintained log books showing details of consignments, consignees etc. and such record is equivalent to consignment note.
5. 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 (50) (b) of Finance Act, 1994.
6. Clauses in the contract showing responsibilities of the two parties in contract dated 1-04-2006 with Super Ready mix carries are reproduced below:
“Operation and Maintenance
15. You will carry out all operation and maintenance . activities at your cost. You will maintain all transit mixers in good working condition with periodical servicing and repair work done timely.
You will be allowed two working days in a calendar month for periodical maintenance of the vehicle on mutual convenient days for which there will be no payment. However, if company official feel that full day maintenance is not required or if company utilizes the vehicles for additional number of days, the payment will be released for those days also.
Based on the company’s requirement, if situation arises, the Vehicle may be transferred to other RMC plants, the diesel / taxes during transportation from one destination to other destination will be borne by the Company.
17. Statutory Permission:
You will have to obtain all the statutory permission from concerned authority for movement of Vehicle in City Limit area. For purpose, we will provide you all the necessary assistance. All charges related to permission obtaining will be borne by you. However, toll charges will be reimbursed on producing bills.
18. Unloading Time:
In case of material is not unloaded within 4 hours of loading time, then Vehicle operator should inform the RMC Representative which in turn should instruct to driver or unload the material immediately, so that setting of the material is avoided. In case of setting of the material in bowl unit for the above reason, then cost of removing the material will be borne by the company. But, in case delay is on account of transit time due to fault of driver, then cost of removing the material from bowl will be borne by you.
19. The vehicle will run 24 hours a day as per instruction of Production In-charge. If vehicle goes on minor break down, the proportionate full amount will be deducted if breakdown is for more than three hours. In case if there is no dispatch on particular day, even though rental charges rental charges mentioned shall be payable to you.
20. You will have to maintain necessary register / records pertaining to the labour deployed as per the labour laws, in force, from time to time.
21. You have to ensure all safety measures at the site and will have to provide safety equipment like safety shoes, helmets, belts, gloves etc. to all personnel who attend the work at the job site. Responsibility for any casualty / accident occurring due to Vehicles operation lies with you and will be borne by you. Under no circumstances, we shall be held responsible for these problems.
22. You will have to meet all statutory requirements of labour engaged for the job and to ensure the risk coverage like accident insurance, ESI, PF and other formalities required by law and as per industry standard. No under age personnel shall be engaged in any work at the job site. You will comply all laws related to labour.
23. Receipts of Goods:
You will obtain proper receipts form the customers after the goods are delivered and also submit reports to us in the formats supplied by us at the required intervals.
Your operator/driver etc. will have to follow the traffic rule strictly. Any penalty levied by traffic police will be in your account. In case of rash driving in drunken condition or otherwise on the part of drivers, you will be solely held responsible for all the consequences and decision of management shall be final and binding for any action and all accidents arising due to various causes. It is your responsibility to settle the accident matter with police, Insurance Company and third party etc. If any loss occurs due to negligence of drivers, it will be debited to your account and will be recovered from your running bill.”
7. The above terms show 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. Definition of goods transport agency as given in section 65 (50b) of Finance Act 1994 reads 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;”
8. 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 proviso in Rule 4A and also Rule 4B of Service Tax Rules, 1944 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 Rule, 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.
9. 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 kilometres 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 for transporting the goods. It is seen the contracts provide for such component of remuneration also.
10. Further this issue is already examined by the Andhra Pradesh High Court in the case of G.S. Lamba & 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.
11. Therefore, we set aside the impugned orders to allow the appeals.