Case Law Details
Bihar State Warehousing Corporation Vs Commissioner of Central Excise & Service Tax (CESTAT Kolkata)
The CESTAT Kolkata considered whether service tax demands under the categories of “storage and warehousing service” and “Goods Transport Agency (GTA) service” were sustainable against the appellant for the period April 2003 to March 2008. A Show Cause Notice dated 17.03.2009, along with a corrigendum dated 22.07.2009, demanded service tax of ₹6,60,85,211/-. The adjudicating authority confirmed the demand with interest of ₹2,06,712/- and imposed penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant contended that the storage services related to food grains, which are agricultural produce and specifically excluded from the definition of “storage and warehousing service” under Section 65(102) of the Finance Act, 1994. The Tribunal accepted this contention and held that the demand of ₹1,33,96,302/- under the category of storage and warehousing service was unsustainable. Regarding GTA service, the Tribunal noted that under Rule 2(1)(d)(v) of the Service Tax Rules, 1994, the liability to pay service tax rests on the consignor or consignee who pays the freight if they fall within the specified categories. As FCI, IFFCO and other depositors were the consignors or consignees liable to pay freight under the storage agreement, the appellant was not liable to pay service tax on GTA services. Accordingly, the Tribunal set aside the demand of ₹5,26,88,909/- under GTA service. Since the appellant did not contest the interest demand of ₹2,06,712/-, the Tribunal upheld it. The appeal was disposed of by setting aside both service tax demands while sustaining the interest component.
FULL TEXT OF THE CESTAT KOLKATA ORDER
M/s. Bihar State Warehousing Corporation, Patna (the appellant) are engaged in providing service under the category of ‘storage and warehousing service’. The appellant was also registered under the category of ‘GTA service’. During the course of examination of ST-3 returns filed by the appellant for the period from April 2003 to March 2008, it was observed that the appellant had not paid appropriate service tax under the categories of ‘storage and warehousing service’ and ‘GTA service’.
2. Accordingly, Show Cause Notice dated 17.03.2009 (including Corrigendum dated 22.07.2009) was issued, demanding total service tax of Rs.6,60,85,211/-.
2.1. The Notice was adjudicated vide the impugned Order-in-Original No. 01/ST/Commr/2010 dated 13.12.2010, wherein the Ld. Commissioner has confirmed the demand of service tax of Rs.6,60,85,211/-, along with interest ofRs.2,06,712/-, and also imposed a penalty of Rs.6,60,85,211/- under section 78 of the Finance Act, 1994 and a penalty of Rs.1000/- under Section 77 of the Finance Act, 1994.
3. Aggrieved against the demands confirmed in the impugned order, the appellant has filed this appeal.
4. The appellant submits that they have received food grains from various sources and stored the same in their warehouses and later distributed it to other public sector units, namely, FCI, IFFCO, etc. The appellant submits that as per Section 65 (102) of the Finance Act, 1994, the definition of “storage and warehousing” includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage. It is their submission that they have rendered the storage and warehousing services in relation to storage of food grains, which are excluded from the definition of ‘storage and warehousing service’. Accordingly, they submit that the amount of Rs.1,33,96,302/-confirmed under the category of ‘storage and warehousing service’ in the impugned order is not sustainable.
4.1. Regarding the demand of service tax under the category of GTA service, the appellant submits that as per Rule 2(1)(d)(v) of the Service Tax Rules, 1994, if the consignor or consignee are one among the seven categories listed therein, the liability for payment of service tax under the category of ‘GTA service’ is on the consignor or consignee of the goods, who pays the freight. In this case, FCI, IFFCO, etc., who are the consignor / consignee, are liable to pay Service Tax as they fall under one of the seven categories listed in Rule 2(1)(d)(v) and paid the freight. Thus, the appellant submits that they are not liable to pay service tax under the category of ‘GTA service’. Accordingly, the appellant contends that the demand of service tax amounting to Rs.5,26,88,909/- [Rs.1,07,73,236/-and Rs.4,19,15,673/- (demanded vide corrigendum dated 22.07.2009 to the Show Cause Notice)] confirmed in the impugned order under the category of ‘GTA service’ is not sustainable.
4.2. The appellant further submitted that the impugned order has confirmed the demand of interest of Rs.2,06,712/-, which they are not contesting and agreed to pay the same.
4.3. In view of the above submissions, the appellant prayed for setting aside the demand in respect of ‘storage and warehousing service’ and ‘GTA service’ confirmed in the impugned order.
5. The Ld. Authorized Representative appearing for the Revenue reiterated the findings of the ld. adjudicating authority in the impugned order.
6. Heard both sides and perused the appeal documents.
7. We observe that the impugned order has confirmed the demands under the category of ‘storage and warehousing service’ and ‘GTA service’. According to the appellant, the demands confirmed under both the categories are not sustainable.
7.1.1. Under ‘storage and warehousing service’, they received food grains from various sources and stored the same in their warehouses and later distributed it to other public sector units such as FCI and IFFCO. We observe that storage of food grains has been specifically excluded from the definition of ‘storage and warehousing service’ as defined under section 65(102) of the Finance Act, 1994. For the sake of ready reference, the section is reproduced below: –
“65 (102) “storage and warehousing” includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage.”
7.1.2. From the above, we observe that storage of agricultural produce is specifically excluded from the purview of ‘storage and warehousing service’. In this case, the appellant has rendered the service of storage of ‘food grains’, which are agricultural products specifically excluded from the scope of the definition of ‘storage and warehousing service’. Therefore, we hold that the demand of service tax amounting to Rs.1,33,96,302/- confirmed in the impugned order under the category of ‘storage and warehousing service’ is not sustainable and accordingly, we set aside the same.
7.2.1.Regarding the demand of service tax under the category of ‘GTA service’, the appellant submits that as per Rule 2(1)(d)(v) of the Service Tax Rules, the consignor or consignee who pays the freight is liable to pay service tax. For the sake of ready reference, the said Rule is extracted below: –
“2. Definitions.
(1) In these rules, unless the context otherwise requires,-
(d) “person liable for paying service tax”, –
(v) in relation 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, any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage;”
7.2.2. In this case, we observe that FCI, IFFCO, etc., are the consignor or consignee who paid the freight. As the consignees fall under one of the seven categories listed in Rule 2(1)(d)(v) and, as submitted by the appellant, as per the agreement, the responsibility to pay the freight falls on the depositor / consignee. The relevant clause of the
“Standard storage Terms & Conditions”, as submitted by the appellant, is extracted below: –
“Standard storage Terms & Condition of Bihar State Warehousing Corporation.
.
.
.
3. Handling & Transportation:
….
3.3 The depositors shall pay Transport Handling charges at the rate fixed irrespective of operations by BSWC from time to time. The operations wise transport handling would comprises unloading from wagon, loading into trucks, unloading from trucks and directly loading into trucks, unloading from trucks stacking in godowns and transportation from Railway goods-shed to warehouse godowns up to 8 Km. only. Operations like weighment, standardisation and other works ancilliary to and connected with handling may also be done on behalf of the basis depositors as and when required at the rate fixed on per bag 50 Kg./100 Kg. by BSWC for each operations from time to time.”
7.2.3. Accordingly, we hold that the demand of service tax from the appellant under the category of ‘GTA service’ is not sustainable and hence, we set aside the same.
7.3. We observe that the appellant has not contested the demand of interest to the tune of Rs.2,06,712/- confirmed in the impugned order. Accordingly, we uphold the confirmation of interest of Rs.2,06,712/- in the impugned order.
8. In view of the above, we pass the following order: –
1. We set aside the demand of service tax of Rs.1,33,96,302/- under the category of ‘storage and warehousing service’ in the impugned order.
2. We set aside the demand of service tax of Rs.5,26,88,909/- [Rs.1,07,73,236/- and Rs.4,19,15,673/- (demanded vide corrigendum dated 22.07.2009 to the Show Cause Notice)] under the category of ‘GTA service’ in the impugned order.
3. The demand of interest of Rs.2,06,712/-in the impugned order is upheld.
9. The appeal filed by the appellant is disposed of on the above terms.
(Operative part of the order was pronounced in open court)
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