Case Law Details
Vedanta Limited Vs Commissioner of GST and Central Excise (CESTAT Chennai)
Introduction: In a significant legal battle, Vedanta Limited has emerged victorious against the Commissioner of GST and Central Excise (CESTAT Chennai). The crux of the matter revolved around the applicability of Service Tax to Vedanta Limited in the absence of a consignment note issued by the goods transport agency (GTA). This article delves into the details of the case, the arguments put forth, and the ultimate decision by CESTAT Chennai.
Analysis:
- Background: Vedanta Limited, engaged in the manufacture of various goods, availed the services of Custom House Agents (CHA) for shipping their export cargo. The CHAs issued invoices for various expenses related to the export of finished goods, including transportation charges. The Department alleged that Vedanta failed to pay Service Tax on these transportation charges from August 2006 to December 2010, leading to a Show Cause Notice.
- Legal Provisions: The crux of the matter hinged on the definition of Goods Transport Agency (GTA) services, which require the issuance of a consignment note for Service Tax liability to be applicable. The Service Tax Rules were scrutinized to determine who is liable to pay Service Tax under GTA services.
- The Argument: Vedanta’s main argument was that the CHAs they engaged were also truck owners/operators who did not issue consignment notes. They contended that without a consignment note issued by a GTA, the activity of road transportation would not fall under the purview of GTA services. They referenced relevant legal provisions and Circulars to support their claim.
- Legal Precedents: Vedanta cited several cases where the demand for Service Tax was set aside because consignment notes were not issued by the service provider. They relied on decisions by the Tribunal, including Carris Pipes and Tubes Pvt. Ltd. Vs. Commissioner of Central Excise and SK Cars India (P) Ltd. Vs. Commissioner of GST.
- Limitation Argument: Vedanta also argued on the grounds of limitation, stating that the demand mostly fell within the extended period. They highlighted that the demand was raised under the reverse charge mechanism, and since it was revenue neutral, it should be set aside.
Conclusion: The crux of the matter was whether Vedanta was liable to pay Service Tax under GTA services. The pivotal factor was the issuance of a consignment note by the goods transport agency. CESTAT Chennai, after examining legal provisions and previous judgments, ruled in favor of Vedanta Limited. The demand for Service Tax was set aside, citing that the absence of a consignment note exempted Vedanta from GTA services’ tax liability. Additionally, the argument on limitation was accepted, further strengthening Vedanta’s case.
In conclusion, Vedanta Limited successfully defended its position against the Commissioner of GST and Central Excise in a significant Service Tax dispute. CESTAT Chennai’s ruling, based on the absence of a consignment note, provided relief to Vedanta and set a precedent for similar cases in the future.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellants are engaged in the manufacture of Copper Anode, Sulphuric Acid and Phosphoric Acid. During the course of Audit, it was noticed that the appellants were availing the services of Custom House Agents for shipment of their export cargo. Invoices raised by the Custom House Agents for the expenditure towards the export of finished goods including lifting charges, PSA SICAL charges, local transportation charges, Security Guard charges, weighment charges, etc.,. It appeared to the Department that the appellant failed to pay the Service Tax on transportation charges of the export cargo for the period from August 2006 to December 2010. Show Cause Notice was issued on 15.09.2011 proposing to demand the Service Tax along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand along with interest and imposed penalty. On appeal, the Commissioner (Appeals) upheld the same. Hence, this appeal.
2. The Ld. counsel Shri Akshit Malhotra appeared and argued for the appellant. The main argument put forward by the appellant is that the Custom House Agents engaged by them were also truck owners/truck operators and that the latter had not raised any consignment note for the said service. The appellants are not liable pay Service Tax as without issuance of consignment note by a GTA, the activity of transportation by road will not fall within the ambit of GTA services. The demand has been raised on the appellant under reverse charge basis, the appellant being the service recipient. The Ld. counsel adverted to the definition of GTA Services in 65(50b). The taxable service defined in 65(105)(zzb). The Service Tax Rules, 1994 was referred to explain as to who is liable to pay Service Tax under GTA Services under reverse charge mechanism.
“Rule 2. Definitions –
(1) In these rules, unless the context otherwise requires,-
[(d)] “person liable for paying service tax”, means-
[(v) inrelation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is,-
a. any factory registered under or governed by the Factories Act, 1948 (63 of 1948)
b. any company [formed or registered under] the Companies Act, 1956 (1 of 1956)
c. any corporation established by or under any law;
d. any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;
e. any co-operative society established by or under any law;
f. any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder; or
g. any body corporate established, or a partnership firm registered, by or under any law,”
3. The same Rules were adverted to by the Ld. counsel to submit that unless a consignment note has been issued by the goods transport agency, the service recipient cannot be called upon to pay the Service Tax. Rule 4B is reproduced as under:-
“4B- Any goods transport agency which provides service in relation to transport of goods by road in a goods carriage shall issue a consignment note 12[to the recipient of service];
Provided that where any taxable service in relation to transport of goods by road in a goods carriage is wholly exempted under section 93 of the Act, the goods transport agency shall not be required to issue the consignment note.
Explanation.- For the purposes of this rule and the second proviso to rule 4A, “consignment note” means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency.]
4. The Circular 39 dated 01.01.2018 was relied to argue as to the clarifications issued by the Board after the introduction of GST in regard to goods transport agency services and consignment note.
“Who is a GTA – Goods Transport Agency?
As per Section 65B(26) of the Finance Act, 1994; “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”. Therefore, in the Service Tax regime, issuance of Consignment Note (C/N) was integral and mandatory requirement before any road transporter could be brought within the ambit of GTA.
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What is a consignment note?
Consignment Note is neither defined in the Act nor in the notification no. 12/2017-Central Tax (Rate). Guidance can be taken from the meaning ascribed to the term under the Explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said rule, consignment note means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency.
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Conclusion
The above discussion shows that not all transport of goods by road is by a GTA. To qualify as services of GTA, the GTA should be necessarily issuing a consignment note. Only services provided by a GTA are taxable under GST Services of transportation of goods by a person other than GTA are exempt. Moreover, in cases where the service of GTA is availed by the specified categories of persons in the taxable territory, the recipients who avail such services are the ones liable to pay GST and not the supplier of services unless the GTA opts for collecting and paying taxes @ 12% (6% CGST + 6% SGST). In all other cases where GTA service is availed by persons other than those specified, the GTA service supplier is the person liable to pay GST. The GTA service supplier is not entitled to take ITC on input services availed by him if tax is being charged @ 5% (2.5% CGST + 2.5% SGST). In case the GTA service supplier hires any means of transport to provide his output service, no GST is payable on such inputs.
In a nutshell, the GST law continues the provisions prevailing under the Service Tax regime. The law recognises that pure transportation of goods services are mostly provided by persons in the unorganised sector and hence has specifically excluded such operators from the tax net. In respect of those who provide agency services in transport, the liability is cast on the recipients in most of the cases or unless option to pay under forward charge has been exercised by the GTA.”
5. The Ld. counsel submitted that in the Show Cause Notice, the Department has alleged that the appellant is liable to pay Service Tax under reverse charge mechanism under the category of goods transport agency services. However, they have not produced any evidence to show that the appellant has been issued a consignment note by a goods transport agency. It is decided in various cases that it is the burden of the Department to adduce evidence to demand the Service Tax.
6. The Ld. counsel submitted that the issue stands covered by the decisions of the Tribunal in the case of Carris Pipes and Tubes Pvt. Ltd. Vs. Commissioner of Central Excise reported in [MANU/CC/0153/2018 (Tri. Chennai)] decided in 25.06.2018, SK Cars India (P) Ltd. Vs. Commissioner of GST [MANU/CC/0120/2023 (Tri. Chennai)]. In both these cases, the demand has been set aside after noting that the assessee has not been issued a consignment note.
7. The decision in the case of Bharat Swabhiman (Nyas) Vs. Commissioner of Customs [2022 (62) GSTL 470 (Tri. Delhi)] was relied by the Ld. counsel to argue that when consignment note is not issued the activity cannot be said to be covered under goods transport agency services and the demand of Service Tax cannot sustain.
8. In the case of Commissioner of Central Excise Vs. JWC Logistics Pvt. Ltd. [2019 (22) GSTL 237 (Tri. Mum.)], the difference between the invoices issued for the freight charges collected as well as the consignment note was discussed by the Tribunal.
9. The Ld. counsel argued on the ground of limitation also. It is submitted that major period of the demand falls within the extended period. The demand is made under reverse charge mechanism and the appellant even if paid the Service Tax would be able to take CENVAT Credit. Being a revenue neutral situation, the demand raised invoking extended period is to be set aside. Further, the services were availed for export of goods and generally taxes are not to be exported. Again, the Department had conducted several audits including CERA audit. In 2009, the audit team had pointed out the objection with regard to non-payment of Service Tax under GTA services. However, the Show Cause Notice has been issued much later in 2011 invoking extended period. For these reasons, it is prayed that the demand raised invoking the extended period may be set aside. The Ld. counsel prayed that the appeal may be allowed.
10. The Authorised Representative Shri N. Satyanarayanan appeared and argued for the Department. The discussions made in paragraph 6.2 of the Order-in-Appeal was adverted to by the Ld. AR to submit that merely because the consignment note has not been issued, the appellant cannot escape the liability of paying Service Tax. The authorities below have considered this aspect and thereafter have confirmed the demand.
11. Heard both sides.
12. The issue is whether the appellant is liable to pay Service Tax under Goods Transport Agency services. The provisions of law have already been noticed. As per the definition under 60(50b) of the Finance Act, 1994, only if the service provider in relation to the transportation of goods by road issues a consignment note, the levy of Service Tax would be attracted to the carriage of goods by the goods transport agency. The Service Tax Rules under Section 2(1)(b), provides that the recipient of service is liable to pay the Service Tax. In the present case, the demand has been raised upon the appellant alleging that they are the recipient of services of goods transport agency services provided by the CHA. Admittedly, the appellant has not been issued a consignment note.
13. The Tribunal in the case of Carris Pipes and Tubes Pvt. Ltd. (supra) had occasion to consider the similar issue has observed as under:-
“5. The main contention put forward by the appellant is that they had availed the services of individual transporters/truck owners. Appellants had prepared vouchers to evidence the payment of freight charges to these transporters. On perusal of the documents, we find that it does not contain any detail with respect to the goods consigned. These vouchers were nothing but documents for monitoring the payment of freight charges to the transporter and can, in no way, be construed as a consignment note. It does not, therefore, evidence the receipt of goods by the consignee, but merely the details of the vehicle, trip and the freight charges paid. The same cannot be called a consignment note as under Section 65(50b) of the Finance Act, 1994. A similar issue was considered by the Tribunal in South Eastern Coalfields Ltd. (supra). The Tribunal observed as under:
“6. The admitted facts are that the appellants engaged various transporters/contractors for moving coal from pithead to railway sidings. These contractors do not issue ’consignment note’ to the appellant. The appellant had issued slips with a view to keep the track of the goods for onwards transportation. We have perused one such slip which is issued at the loading point. The serial numbered form contained certain details like weight, date, etc. The admitted fact is that the consignor and consignee are one and the same and transporter of goods is not issuing any consignment note. In such a situation, the original authority quoting “letter and spirit of the statute” observed that by not issuing consignment note the transporter had violated the provision of Rule 4B of the Service Tax Rules, 1994. We find that the reasoning followed by ld. Commissioner is devoid of merit. It is relevant to examine the concerned legal provisions :
Section 65(105)(zzp) of the Act defines the taxable service as under :
(zzp) to any person, by a goods transport agency, in relation to transport of goods by road in a goods carriage;
Section 65(50b) of the Act defines ‘goods transport agency’ 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;
It is clear that to be called “goods transport agency” a person should fulfil two conditions, namely, he should provide service in relation to transport of goods by road and issue consignment note, by whatever name called. In the present case, admittedly, no consignment note was issued by the goods transporter. The original authority held that the slip/challans issued for monitoring purposes by the appellant (receiver of service) will satisfy such conditions and tax liability can be upheld. We are unable to understand or appreciate such reasoning. The original authority is creating an amalgamation of service provider and recipient to fit in the definition of Goods Transport Agency. In other words, the transport of coal is done by the transport contractor which satisfied the first condition but no consignment note being issued. The slip issued by the appellant as recipient of service is taken with such activity of transport to bring in tax liability. We find that such attempt is beyond the scope of law and without merit.
7. The matter has come up for decisions on earlier occasions by the Tribunal in NandganjSihori Sugar Co. Ltd. and Others v. C.C.E. Lucknow – 2014 (34) S.T.R. 850 (Tri. –Del.), it was held that the Goods Transport Agency in terms of its definition under Section 65(50b) provides services in relation to transportation of goods and issues consignment note which should have particulars as prescribed in Explanation to Rule 4B.
8. In cases where admittedly no consignment notes have been issued, the said transporter cannot be called Goods Transport Agency. In Birla Ready-mix – 2013 (30) S.T.R. 99 ((Tri. –Del.), it was held that the provisions of the Act has to prevail and the definition at Section 65(50b) has to be understood independent of Rule 4B of the Service Tax Rules, 1994 to decide whether the person concerned is a goods transport agency.
9. In Northern Coalfields Limited v. C.C.E., Bhopal vide Final Order No. 53313/2015, dated 29-10-2015, an identical situation was examined by the Tribunal. There also, the payment slips were generated by the service recipient containing relevant particulars like truck number, weight, etc., for monitoring and paying contractors for their service. No consignment notes were issued by the transporter. The Tribunal held that as no consignment note as generally understood or delineated in Rule 4B was issued by the transporter to the appellant in the transaction the tax liability under GTA does not arise.”
14. In the said case, the Tribunal followed the decision in South Eastern Coalfields Ltd. Vs. Commissioner of Central Excise [2017 (47) STR 93 243 (Tri. Del.)], and held that the demand cannot be sustained if no consignment note has been issued to the service recipient.
15. In the case SK Cars India (P) Ltd. (supra), similar view was taken:-
“7. A portion of the demand also has been raised under the category of GTA. The appellant has paid the freight expenses in connection with transportation of Cars to their customers. However, they have not issued any consignment notes which are necessary to identify the appellant as a goods transport agency. As per the views expressed by the Tribunal in the case of South Eastern Coal Fields Ltd. (supra), in the absence of consignment notes, the activity of the appellant cannot be classified under GTA service. Consequently, we set aside the demand under GTA service.”
16. In the case of Bharat Swabhiman (Nyas) (supra), the Tribunal held as under:-
“17. The next issue that remains to be decided is whether the appellant is liable to pay service tax on the freight amount paid by it on a reverse charge mechanism.
18. ‘Goods transport agency’ service has been defined in Section 65(26) of the Finance Act to mean any person who provides service in relation to transport of goods by road and issues consignment notes, by whatever name called. In the present case, consignment notes have not been issued and so the activities cannot be said to be covered under ‘goods transport agency’ services.
19. In this connection it would be useful to refer to the decision of the Tribunal in Bhoramdeo Sahakari Shakhar Utpadam Karkhana v. Commissioner of Customs, Central Excise & Service Tax, Raipur [2019 (10) TMI 1416-CESTAT, New Delhi], wherein it has been held that service tax can be levied only if consignment notes are issued.
20. Thus, service tax liability could not have been fastened on the appellant under the reserve charge mechanism.
21. It would, therefore, not be necessary to examine the other contentions raised by the learned counsel on behalf of the appellant.
22. The order dated 13-7-2016 passed by the Commissioner, therefore, cannot be sustained. It is, accordingly, set aside and the appeal is allowed.”
17.1. The Tribunal in the case of JWC Logistics Pvt. Ltd. (supra), had occasion to make a discussion with regard to the distinction between invoices and consignment note. It was held that unless a consignment note is issued, the ingredients of goods transport agency services are not satisfied and therefore the demand under the said category cannot survive.
“7. The case of Revenue is that a transporter has been used and monthly bills, containing essential ingredients of the consignment note, as laid down in Rule 4B of Service Tax Rules, 1994 were issued. According to Learned Authorised Representative, with Rule 4B prescribing the contents of a consignment note, decision in re Bharathi Soap Works on non-issue of consignment note which is normative, tax liability of the recipient does not get erased.
8. It is not the transportation of goods by road that is subject to tax but the services rendered by a goods transport agency in relation to the transportation of goods by road and road transport agency tasked with responsibilities that others connected with road transport are not, with consignment note being the point of difference. There is also no doubt that Rule 4B of the Service Tax Rules, 1994 lays down the contents of a consignment note.
9. Revenue relies upon the invoices or monthly bills raised by M/s. V.B. Enterprises. An invoice, notwithstanding adequacy of details thereon is no substitute for a consignment note. An invoice creates liability of debt on the part of the recipient of the service. A consignment note, on the other hand, carries with it a certain legal burden, the issuing of a consignment note is a contractual undertaking made to the entity that handed over the goods to the agency of responsibility for safe delivery at the stipulated destination. A consignment note also creates binding responsibility for each consignment. In the absence of any evidence of such responsibility having devolved on M/s. V.A. Enterprises and the issue of monthly bills does not, ipso facto, creates such liability and the impugned order is not at fault for having held that tax liability does not arise.
10. In view of the findings recorded in the impugned order which the appeal of Revenue is unable to controvert, the impugned order must survive. Accordingly, the appeal of Revenue is dismissed. Cross-objections also disposed of.”
17.2. After appreciating the facts and following the above decisions, we hold that the demand of Service Tax cannot be sustained. The issue on merits is answered in favour of assessee.
18. The Ld. counsel has argued on the grounds of limitation also. We take note of the fact that the situation is entirely a revenue neutral as well as the fact that several audits have been conducted raising the objection of non-payment of Service Tax under GTA services. The Department had full knowledge about the issue and still the Show Cause Notice has been issued invoking the extended period which in our view cannot be sustained. The appellant succeeds on the ground of limitation also.
19. In the result, the impugned order is set aside. The appeal is allowed with consequential relief.
(Order dictated in open court)
