Laxmi Narayan Transport Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
CESTAT Kolkata held that composite contract involving transportation of goods and loading/unloading, packing/unpacking, etc. will be treated as a contract for transportation only as the other services are naturally bundled together with the principal service of transportation. Accordingly, service tax leviable under GTA service and not under cargo handling service.
Facts- The Central Preventive unit(CPU) of Central Excise and GST Commissionerate, Bhubaneshwar, initiated an investigation against the Appellant, M/s Laxmi Narayan Transport, on the allegation that they have failed to discharge Service tax on the services provided to M/s. Sanjay Sahani Transport Agency (P.) Ltd. (SSTAPL) and M/s. Jindal Stainless Limited (JSL).
Thereafter, a Show Cause Notice dated February 14, 2018 was issued to the Appellant demanding Service tax of Rs.3,16,39,804/- along with interest and penalty for the period 2012-13 to 2016-17, by invoking extended period of limitation. The said demand was computed on the basis of TDS Certificates in form 26AS issued by the Income tax The said Notice was adjudicated by the Commissioner vide impugned order dated 02.05.2019, wherein the demand of service tax made in the notice was confirmed along with interest and penalty, by classifying the service rendered by the Appellant as ‘Cargo handling service’. Aggrieved against the impugned order, the Appellant has filed the present appeal.
Conclusion- Held that when a composite contract is entered into between parties for transportation service including various intermediate or ancillary services provided in relation to the principal service of road transport of goods such as loading/unloading, packing/unpacking, transhipment etc., which are provided in the course of transportation, such contract cannot be vivisected. It will be treated as a contract for transportation only as the other services are naturally bundled together with the principal service of transportation.
Held that the services provided by the Appellant to M/s SSTAPL as a sub-contractor as well as M/s JSL directly, was transportation of goods service and not cargo handling service. Accordingly, we set aside the demand confirmed in the impugned order under ‘cargo handling service’ on merit as well as on limitation. Since the demand itself is not sustainable the question of demanding interest and imposing a penalty does not arise.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The primary issue involved in the present appeal pertains to classification of service, whether the services provided by the Appellant qualify as “cargo handling services” as contended by the Revenue or “Goods transport agency services” as contended by the Appellant.
2. Briefly stated facts of the case are that the Central Preventive unit(CPU) of Central Excise and GST Commissionerate, Bhubaneshwar, initiated an investigation against the Appellant, M/s Laxmi Narayan Transport, on the allegation that they have failed to discharge Service tax on the services provided to M/s. Sanjay Sahani Transport Agency (P.) Ltd. (SSTAPL) and M/s. Jindal Stainless Limited (JSL).
3. The transactions undertaken by the Appellant during the period under dispute can be divided into two categories:
Period – April 2012 to December 2014
3.1. During the period April 2012 to December 2014, M/s. SSTAPL was engaged by M/s. JSL for providing transportation services to M/s. JSL. M/s. SSTAPL, on whom work order was placed by M/s. JSL, outsourced the said service from the Appellant, by placing separate work orders stipulating the terms and conditions there in. The Work orders placed by M/s. SSTAPL to the Appellant was meant for ‘Rake handling at Sukinda Railway station & Transportation of the same material from Sukinda railway siding to Jindal Stainless Limited at KNIC, Duburi, Orissa.
3.2. After successful completion of the job and necessary certification by M/s. JSL, the Appellant raised invoices on M/s. SSTAPL for “Transportation and Unloading of Coal from Sukinda Railway Siding to JSL, KNIC”. The Appellant did not issue any ‘Consignment Note’ in the name of the consignee M/s. JSL. After loading of the goods into the Rakes, consignment notes containing all the necessary particulars were issued by M/s. SSTAPL in the name of M/s. JSL, the consignee. Service tax as applicable was duly discharged under reverse charge by M/s. JSL on the GTA Service.
Period – January 2015 to March 2017
3.3. The Appellant started providing Goods transport agency services directly to M/s. JSL w.e.f. January, 2015. ‘Consignment notes’ were issued for such GTA service provided by the Appellant to M/s. JSL and invoices were duly raised. Service tax under reverse charge was duly discharged by M/s. JSL on the GTA service. The Work order No. JSL/OPN/TRTP/LNT/DEC/1/2014-15 dated 02.12.2014 stipulates the scope of work as handling with transportation of inward and outward rake cargo from Sukinda and Jakhapura railway sidings to JSL plant and vice versa. The Work order No. JSL/OPN/TRPT/LNT/NOV/12/2015-16 dated November 5, 2015 stipulates the scope of work as transportation with handling of inward and outward rake cargo from JSL railway sidings to its plant and vice-versa. The contract charges are cumulative on per metric tonne basis. Service tax thereon is liable to be paid by JSL.
4. A Show Cause Notice dated February 14, 2018 was issued to the Appellant demanding Service tax of Rs.3,16,39,804/- along with interest and penalty for the period 2012-13 to 2016-17, by invoking extended period of limitation. The said demand was computed on the basis of TDS Certificates in form 26AS issued by the Income tax The said Notice was adjudicated by the Commissioner vide impugned order dated 02.05.2019, wherein the demand of service tax made in the notice was confirmed along with interest and penalty, by classifying the service rendered by the Appellant as ‘Cargo handling service’. Aggrieved against the impugned order, the Appellant has filed the present appeal.
5. In their grounds of appeal, the Appellant stated that they have provided bundled service to their clients. The impugned order has failed to appreciate the nature of bundled service provided to the recipients in terms of the work Orders issued to them. A perusal of the Work Orders clearly establishes that goods transport was the principal service and all other elements of the contracts are incidental and ancillary to the principal service. Applying the test of essentiality as set out under Section 66F(3)(a) of the Finance Act, 1994 (‘the Act’) the naturally bundled composite contract would be essentially for goods transportation service and not for Cargo handling service.
6. In support of their claim. the Appellant relied on the Board Circular No. 104/07/2008-S.T. dated 6-8-2008, wherein it has been clarified as under:
“3. Issue: GTA provides service to a person in relation to transportation of goods by road in a goods carriage. The service provided is a single composite service which may include various intermediary and ancillary services such as loading/unloading, packing/unpacking, transshipment, temporary warehousing. For the service provided, GTA issues a consignment note and the invoice issued by the GTA for providing the said service includes the value of intermediary and ancillary services. In such a case, whether the intermediary or ancillary activities is to be treated as part of GTA service and the abatement should be extended to the charges for such intermediary or ancillary service?
Clarification: GTA provides a service in relation to transportation of goods by road which is a single composite service. GTA also issues consignment note. The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transhipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road. The contention that a single composite service should not be broken into its components and classified as separate services is a well-accepted principle of classification. As clarified earlier vide F. No. 334/4/2006-TRU dated 28-2-2006 (para 3.2 and 3.3) and F. No. 334.1/2008-TRU dated 29-2-2008 (para 3.2 and 3.3), a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The method of invoicing does not alter the single composite nature of the service and classification in such cases are based on essential character by applying the principle of classification enumerated in section 65 A. Thus, if any ancillary/intermediate service is provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the GTA, and not by any other person, such service would form part of GTA service and, therefore, the abatement of 75% would be available on it.”
7. The Appellant also cited the Board Circular No. 186/5/2015-ST dated 05-10-2015 on similar lines. The clarifications cited above clearly establishes that when a composite contract is entered into between parties for transportation service including various intermediate or ancillary services provided in relation to the principal service of road transport of goods such as loading/unloading, packing/unpacking, transhipment etc., which are provided in the course of transportation, such contract cannot be vivisected. It will be treated as a contract for transportation only as the other services are naturally bundled together with the principal service of transportation.
8. The Appellant also relied on the following rulings in support of their contention:
