Case Law Details
Jai Balaji Industries Limited Vs Commissioner of Central Excise (CESTAT Kolkata)
Introduction: The case of “Jai Balaji Industries Limited vs. Commissioner of Central Excise” heard by the Central Excise and Service Tax Appellate Tribunal (CESTAT) Kolkata revolves around the issue of whether Service Tax should be levied on the actual transportation charges incurred by the appellant or on provisions made for transportation charges.
1. Background of the Case: The appellant, Jai Balaji Industries Limited, is a mini integrated steel plant engaged in the manufacture of various products. They procured inputs for manufacturing their products, including different modes of transportation services. The case pertains to the period when Goods Transport Agency services were brought under the service tax net.
2. Key Arguments: The dispute arose when there was a variation in transportation charges between carriage inward and outward, as per the values reported in the ST-3 Returns of the appellant. A show-cause notice was issued, alleging that the appellant had paid less service tax due to the difference in reported transportation charges.
3. CESTAT Kolkata’s Decision: CESTAT Kolkata examined various aspects of the case and considered the appellant’s arguments:
- The appellant had made payments through challans, which were not initially considered by the adjudicating authority. CESTAT Kolkata concluded that the demand for service tax related to these payments was not sustainable.
- In certain instances, the transporter had already paid service tax on transportation services, and invoices indicated that the service tax had been covered. CESTAT Kolkata ruled that the demand related to such services was not justified as it would lead to double taxation.
- For services related to transportation of goods sold by the appellant, CESTAT Kolkata found that the transportation charges had already been paid. Therefore, the demand in this regard was not sustainable.
- The demand based on provisions made for transport expenses was also deemed unsustainable. CESTAT Kolkata emphasized that service tax should be levied on actual transportation charges, not on provisions made for such expenses.
4. Conclusion: CESTAT Kolkata concluded that the entire demand made through the impugned order was not sustainable. The appeal by Jai Balaji Industries Limited was allowed, and any consequential relief was granted as per law. The ruling clarified that Service Tax should be levied on actual transportation charges incurred, and demands based on provisions or other grounds were deemed unjustified.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is in appeal against the impugned order.
2. The appellant, a mini integrated steel plant, is engaged in the manufacture of TMT Bars, Sponge Iron, Pig Iron, Billets, Silico Manganese and Ferro Manganese. The appellant is required the inputs to manufacture the final products and the input procured by the appellant for different modes of transportation and as Goods Transport Agency, has been brought into the service tax net w.e.f.13.12.2004 and the person who has received the transport agency service is required to pay service tax under reverse charge mechanism.
2.1 On scrutiny of service tax related documents for the period 200607 to 2007-08, it was found that there was a variation of transportation charges for carriage inward and outward as per the value shown in their ST-3 Returns. Thereafter, it is alleged that the appellant has paid less service tax as there is a difference in transportation charges paid by the appellant corresponding to ST-3 Returns.
2.2 In view of this, a show-cause notice was issued to the appellant to demand service tax of Rs.72,75,885/-. By way of adjudication, the adjudicating authority dropped the demand of Rs.44,28,375/- but to confirm Rs.28,47,510/- along with interest and an equivalent amount of penalty was also imposed .
2.3 Aggrieved from the said order, the appellant is before us.
3. The ld. Authorised Representative for the appellant, submits that an amount of Rs.12,99,559/- was paid by the appellant by way of two Challans dated 05.06.2007 & 04.06.2008, which were not considered by the adjudicating authority. Therefore, the said demand is required to be reduced from the total demand.
3.1 With regard to Rs.3,29,320/-, it is his contention that the service tax on the said service was paid by the service provider i.e. transporter, who raised the bills on the appellant, which showing that the service tax has been paid by them. In that circumstances, the appellant is not liable to pay service tax. If it would have been paid , it would be double taxation on the same services.
3.2 With regard to Rs.3,40,377/-, it is his contention that the appellant, as per the records, it is freight paid sale, which means that on the goods sold by the appellant, the transport charges have been paid for those transportation charges. Therefore, the appellant is not required to pay service tax as it is not an input service for the appellant qualifying as Goods Transport Agency.
3.3 Further, for the demand of Rs.4,33,547/-, it is his contention that the freight was paid to M/s Container Corporation of India for outward freight, which reveals that the payment was made to M/s Container Corporation of India for transportation of goods from their factory and the appellant has made a provision for the said payment which has been adjusted after the year end. Therefore, the said amount is not payable by the appellant as the same is on sale of the goods.
3.4 With regard to Rs.5,98,625, it is his contention that during the period, they made the provision for payment of freight as they did not receive actual invoices of transportation charges and after receiving the invoices from the transporter, they adjusted the amount where the provision is made for more amount and whereas they received less amount invoices. In that circumstances, the difference of provision and the actual amount is to be adjusted and if the same is adjusted, no service tax is payable by the appellant.
3.5 Finally, it is his submission that if all these things are considered, the appellant has paid more the service tax as demanded in the impugned order. In that circumstances, the impugned order is to be set aside.
4. The ld. A.R. for the Revenue, reiterated the findings of the impugned order.
5. Heard both the parties and considered the submissions.
6. We find that by way of impugned order, the total demand of Rs.28,47,510/- has been confirmed against the appellant. After verification of records, for demand of Rs.12,99,559/-, the appellant has produced two challans, which are extracted below :
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The above two challans were not considered by the adjudicating authority and at the time of hearing of the Stay Petition filed by the appellant, the same were sent for verification but the respondent neither denied the said payment made by the appellant nor verified the same from their records. Therefore, it was concluded by the Tribunal while considering the Stay Petition that the appellant has paid the said amount. Therefore, to that extent, the demand of service tax of Rs.12,99,559/- is not sustainable.
7. It is evident from the records that the transporter, who has transported the goods at the premises of the appellant, has paid the service tax on the transportation service and the same is made evident from the invoices. In that circumstances, we hold that the demand of Rs.3,29,320/- is not sustainable against the appellant.
8. For the demand of Rs.3,40,377/-, it is evident from the record that the service received by the appellant for transportation of goods on sale to their various buyers. Therefore, the said service is not a service received by the appellant, in fact, the appellant has paid the transportation charges for the railways of transportation of goods outward from their factory. In that circumstances, the appellant is not liable to pay service tax thereof. Therefore, the demand of Rs.3,40,377/- is not sustainable.
9. We also take note of the fact that the demand of Rs.4,33,537/-has been confirmed wherein the appellant has made the provision (liabilities for expenses) for payment to M/s Container Corporation of India and the freight has been paid on sale as this amount has been confirmed on the basis of book entries, but the said transportation charges are for sale of goods. Therefore, the said demand is also not sustainable.
10. The demand of Rs.5,98,625/-, has been confirmed on the basis of provision made by the appellant for transport expenses payable by the appellant. The appellant was not receiving the invoices of transportation charges from the transporter and later on the transporter sent the invoices of less amount on which the service tax is paid to them. In that circumstances, the provision made by the appellant is adjusted at the end of the year and the said entry has been taken in the corresponding year. In that circumstances, we hold that the appellant is required to pay service tax on actual transportation charges not on the provision made for transportation charges. Therefore, the said demand is also not sustainable.
11. In view of this, we hold that whole of the demand by way of impugned order is not sustainable against the appellant. Therefore, the impugned order qua demanding service tax of Rs.28,47,510/- is set aside and the appeal is allowed with consequential relief, if any.
(pronounced in the open court on 06.09.2023)
