Custom, Excise & Service Tax Tribunal
The Freight Centre vs Cgst & Central Excise Ahmedabad South on 24 September, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH - COURT NO. 3
SERVICE TAX Appeal No. 11251 of 2014-DB
[Arising out of Order-in-Original/Appeal No STC-60-COMMR-AHD-2013 dated 31.12.2013
passed by Commissioner of Service Tax-SERVICE TAX - AHMEDABAD]
The Freight Centre .... Appellant
GF Jadav Flats, Opp. Thakor Baug,
B/s, Sardar Patel Seva Samaj Hall, Navrangpura,
AHMEDABAD, GUJARAT -380009
VERSUS
Commissioner of Central Excise & ST, Ahmedabad .... Respondent
7 th Floor, Central Excise Bhawan, Nr. Polytechnic CENTRAL EXCISE BHAVAN, AMBAWADI, AHMEDABAD, GUJARAT -380015 AND SERVICE TAX Appeal No. 11046 of 2015-DB [Arising out of Order-in-Original/Appeal No AHM-SVTAX-000-APP-225-14-15 dated 27.03.2015 passed by Commissioner of Service Tax-SERVICE TAX - AHMEDABAD] The Freight Centre .... Appellant GF Jadav Flats, Opp. Thakor Baug, B/s, Sardar Patel Seva Samaj Hall, Navrangpura, AHMEDABAD, GUJARAT -380009 VERSUS Commissioner of Central Excise & ST, Ahmedabad .... Respondent 7 th Floor, Central Excise Bhawan, Nr. Polytechnic CENTRAL EXCISE BHAVAN, AMBAWADI, AHMEDABAD, GUJARAT -380015 APPEARANCE :
Shri Hasit D. Dave, Advocate for the Appellant Shri Rajesh Nathan, Asst. Commissioner, (AR) for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) DATE OF HEARING : 16.07.2024 DATE OF DECISION: 24.09.2024 FINAL ORDER NO. 12141-12142/2024 C.L. MAHAR :
The appellants are a registered "Courier agency service" besides also being sales partner of FedEx Corporation and providing courier services and discharging the service tax liability upon the same since the year 2005.2
Appeal No. ST/11251/2014 & ST/11046/2015-DB
2. On verification of their profit & loss account as per Income Tax return vis-a-vis their ST-3 returns by officers of Service tax Commissionerate, Ahmedabad it was noticed that that there was a difference between the income reflected by the Appellant in their ST-3 returns and the profit and loss account. Further, the officers examined the income ledger account of the appellant. The income as per ST-3 return, profit and loss account and income ledger are reflected as under: -
Year Income as per ST- Income as per Income as per
3 returns profit and loss Ledger account
account
2005-06 16,55,210 5,76,65,766 5,77,13,855
2007-08 3,07,94,919 6,86,64,352 6,84,45,631
2008-09 6,86,38,888 13,09,94,807 13,34,02,259
2009-10 15,24,77,900 20,68,97,594 21,20,43,656
2010-11 27,93,78,097
2.1 The appellant vide letter dated 22.11.2010 submitted that the short
payment/differential amount is due to the exempted services provided by them which are not attracting service tax. They submitted that services related to co-loader service and another service related to Air-Freight charges on exports do not attract service tax. They further submitted that as per Notification No. 29/2005 dated 15.07.2005, the Government of India has granted exemption from service tax in respect of services provided by Air Craft Operators in relation to transport of export goods.
2.2 A show cause notice dated 03.10.2011 was issued for the period 2006-07 to 2010-11 to the appellant on the ground that the appellant had provided the courier agency services for the whole amount as reflected in their ledger and suppressed the value for evading the service tax payable thereon and accordingly demanded service tax on the differential value between the ST-3 returns and the ledger income, raising a demand of service tax amounting to Rs. 2,82,62,810/- under proviso to Section 73(1) of the Finance Act, 1994 besides invoking Section 75 for demand of interest and Section 76 & 78 for imposing penal provisions.3
Appeal No. ST/11251/2014 & ST/11046/2015-DB 2.3 The appellant in their reply to the show cause notice stated that the matter is basically for the reconciliation of figures between service tax returns filed and books of accounts; that their business consists of mainly three type of transactions ;
(a) first type is the services as courier agencies where their bills are raised against customers and courier services are provided; that they have paid tax in respect of these transactions and filed returns; that these transactions are not in dispute.
(b) that second type of transactions are the services provided by them as co-loader ; that the term co-loader is applied when the actual courier service to the customer is provided by another courier agency and the documents or cargo is subsequently handled by another service provider; that such another service provider raises bill on the courier agency which had raised the bill on the customer ; that obviously the cost and charges of such co-loader billed to courier agency, forms part of the cost of the courier agency service and therefore, forms part of the cost of that courier agency service and since they do not charge anything for this work they do not pay tax on these transactions as these are exempt services.
(c) that the third type of activity is of providing air freight services; that in the cases of Export cargo they buy the rates from Authorized IATA (International Air Transport Association) agents and sell it to their associates and exporters by adding their margin. The associates and exporters put export documents on by mail and they book it further to respective airlines through authorized IATA agent; that physical cargo comes at Air Cargo Complex Ahmedabad and Mumbai, they hand over the cargo to respective agents/airlines operation staff at airport; further, they transport the cargo to the respective international airports.
3. The appellant further claimed that the onus is on the department to show that the receipts are in respect of taxable services; that in the present proceedings, the entire difference in receipts is presumed to be taxable service whereas no service tax payable on activities which are different and distinct from the taxable service as courier agency. The appellant further claimed that this is a pure matter of interpretation and all the facts are on 4 Appeal No. ST/11251/2014 & ST/11046/2015-DB record and in such a factual situation of difference in opinion as to the classification and taxability, is a healthy difference and does not indicate any intention to evade and such healthy difference cannot invite extended period of limitation and penalty.
3.1 The Ld. Commissioner vide impugned order-in-original confirmed demand of Rs. Rs. 2,82,62,810/- under Section 73(1) besides demanding interest under Section 75 and imposing penalties under Sections 76 & 78 of the Finance Act, 1994. Now the appellant is before us against the impugned order.
3.2 During the course of hearing Ld. Counsel Shri Hasit Dave appearing on behalf of the appellant argued that the appellant, in addition to providing courier agency services (on which service tax is already paid), also undertakes the export of cargo by air from one airport to another in a foreign country. They book space on aircraft operated by airlines like FedEx, Emirates, and Lufthansa, and these airlines charge the appellant according to their tariffs. The appellant then bills the exporter, adding a profit margin, but does not charge service tax since the transport of cargo by air or sea for export is exempted from service tax. The appellant operates on a principal- to-principal basis and is not an agent of any airlines, bearing the risk on behalf of the exporter. The dispute in the appeal concerns a demand for service tax on the export of cargo services due to difference between the appellant's income in books of accounts and service tax returns, where only courier agency services were declared. The tax authorities argue that the appellant's airport-to-airport cargo transport falls under "courier agency services" as defined in Section 65(33) of the Finance Act, 1994 on the basis of which the Commissioner of Service Tax, Ahmedabad, confirmed the demand in the impugned order. The appellant, however, asserts that their airport-to-airport transport of export cargo does not meet the definition of "courier agency services" since it does not involve door-to-door delivery or time-sensitive goods, which are prerequisites. Hon'ble Gujarat High Court's decision in the case of CCE, Surat-l vs. Patel Vishnu Bhai Kantilal & Co. - 2012 (28) STR 113 (Guj). has analysed the definition of courier agency services & that in the facts of the present case, none of the prerequisite of the courier agency services has been fulfilled by the activity carried out by the Appellants. The Hon'ble High Court has dissected the definition of courier 5 Appeal No. ST/11251/2014 & ST/11046/2015-DB agency service as under. The submission of the Appellants on the activities are also mentioned opposite to the observations of the court as under:
15. Thus, for a person to fall within the ambit of "courier agency" as defined under Clause (33) of Section 65 of the Act, the following ingredients would be required to be satisfied :
Such person should be engaged in door-to-door transportation; - Not carried out by the Appellants in the present case;
the transportation should be of time-sensitive documents, goods or articles; - No time sensitive documents, articles or goods carried out by the Appellants in the present case;
(iii) such transportation should be carried out by utilising the services of a person, either directly or indirectly; In the present case none has accompanied the goods;
(iv) the person whose services are so utilised should carry or accompany such documents, goods or articles. As mentioned above none has accompanied or carried the goods.
Further, the Hon'ble High Court has also observed that unless the activity falls within the ambit of charging section by clear words used in the section, no one can be taxed by implication. A charging Section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all.
3.3 He further relied upon Board Circular issued under F. No. 341/43/96- TRU dated 31.10.1996 claiming that it has been clearly clarified that door- to-door delivery of goods, articles or thing is essence of courier agency services; that if the transporter of goods deliver the goods on door-to-door then he ceases to be the transporter and becomes the courier agency service provider. In other words, if the person does not deliver the cargo on door-to-door delivery basis then his activity will be classified as transporter only. The Appellants have un-disputably transported the goods only and not provided the services of a courier agency.
4. On the other hand, Shri Rajesh Nathan, learned Asst. Commissioner, (AR) Argued on behalf of the Revenue and re-iterated the findings of the impugned order. He argued that the services rendered by the appellant were falling within the ambit of "courier Agency Service". In this case, the main 6 Appeal No. ST/11251/2014 & ST/11046/2015-DB issue is whether the activities claimed to be of a co-loader and the air freight business of the assessee are taxable under the "courier agency" service. That, the appellant argued that the income from services provided to co- loaders and in their freight business were not taxable. based on the Central Board of Excise & Customs Circular F.No.341/43.96-TRU dated 31-10-96, wherein it was clarified that services provided by co-loaders to courier agencies are not taxable. If the appellant have themselves worked as co- loaders for some other courier agency and collected some amount, they are not liable to pay service tax but where some documents, goods or articles, are given to them for transmission by their clients, to co-loaders, they are required to pay service tax. That Shri K.A. Shah, Proprietor, has deposed in his statement that the exporters put export documents to them and they book it further to respective airlines through authorized IATA agent and physical cargo comes at Air Cargo Complex, Ahmedabad and Mumbai. They handover the cargo to respective agent/airlines operation staff at airport. Further they transport the cargo to the respective international airports. Further the airlines hand over the consignment to consignee's broker/agents for further process. They receive the payment from the exporters and after deducting their margin, balance payment is paid to IATA agent/airlines.
5. We have also heard learned AR who has reiterated the findings of the impugned order-in-original.
6. We have carefully gone through the rival arguments. Unfortunately, except for two consignments pertaining to Gujarat Institute of Housing and Estate Developers and M/s.. Infinity Logistics which has been discussed in the impugned order, for the rest of the value involved in the impugned order, there is nothing on record either produced by the appellant or examined by the authority which could shed light on the nature of actual transactions entered into by the appellants as no documentation, or the manner of invoicing inter-se between various entities involved in the transactions, whether the invoices were bearing freight charges upto airport or the end destination. Two consignments which has been discussed in the impugned order are discussed as under :
(a) The first one is about GIHED Sales income shown in Rs.
81,78,947/- in their profit and loss account for the year F.Y. 2008-09, for which the appellant stated that GIHED (Gujarat Institute of 7 Appeal No. ST/11251/2014 & ST/11046/2015-DB Housing and Estate Developers) had participated in World Gujarati Conference at New Jersey USA; that around thirty exhibitors from Ahmedabad exhibited their current projects in India; that they (The Freight Centre) had taken care of complete logistics from Ahmedabad to USA for GIHED group members; that M/S. The Freight Centre and M/s. Penta Freight Pvt. Limited had jointly handled the cargo movement, that Sh. K.A. Shah(the prop.) also personally visited to USA to help the local agent to identify the cargo of different exhibitors; that after end of Exhibition event the balance cargo was brought back by sea for which services were provided by M/S. Penta Freight Pvt. Limited. The cargo was handed over to various exhibitors' of GIHED by them (The Freight Centre). M/s. Penta Freight Pvt. Limited has raised invoices to them and they raised bills to various exhibitors.
(b) The second consignment claimed by the appellant was given to them by M/s.. Infinity Logistics (Mumbai based company) for around 250 tons of cargo from Hyderabad to Madrid, Spain. They received cargo from Infinity Logistics at Hyderabad air cargo complex and they further delivered the cargo to M/S. Federal Express Corporation. He further stated that for around 250 tons of this cargo they have raised invoices to M/s. Infinity Logistics; that they have neither charged nor collected service tax from M/S. Infinity Logistics around 250 tons of cargo from Hyderabad to Madrid, Spain. They received cargo from Infinity Logistics at Hyderabad air cargo complex and they further delivered the cargo to M/s. Federal Express corporation; that for around 250 tons of this cargo they have raised invoices to M/S. Infinity Logistics; that they have neither charged nor collected service tax from M/S. Infinity Logistics.
7. The Learned Commissioner has held that the impugned activities in the two consignments discussed above were of "Courier Agency Service"
with the following findings:
"30. The said assessee has alleged that the department has given only two examples in the show cause notice viz., examples of GIHED and M/S. Infinity Logistics, and all other transactions have been treated as similar and service tax has been demanded without examining each transaction. In this regard, I find from the records that the motto of citing the example of GIHED in the show cause 8 Appeal No. ST/11251/2014 & ST/11046/2015-DB notice is to show that the said assessee attempted to evade payment of service tax by showing the accounting entries differently. Accordingly, when the consignment of goods of GIHED exported by the said assessee were otherwise exigible to service tax, they had shown the income received from GIHED as freight charges. In the case of GIHED the said assessee had provided integrated courier agency service viz., they packed the material, transported it to airport at Ahmedabad and then transported from airport at USA to site of World Gujarati Conference. They issued a single invoice to one of the member of GIHED by showing freight charges @ Rs. 185/- per kg. and packing with material/labour/transportation/pick up to airport/forclip charges @ Rs. 12/- per kg. The Circular issued by TRU Circular F.No. 341/43/96-TRU, dated 31-10-1996 referred above clarifies the position in this regard as under :-
"It has been represented that some courier agencies undertake comprehensive business and provide integrated transportation, warehousing, packing, inventory management, etc. Doubts have been expressed whether courier agencies are liable to pay service tax in respect of service provided in relation to warehousing, packing, inventory management, etc. It is clarified that where even the above facilities are relatable to door to door transportation and are undertaken by the courier agencies themselves, the charges for such facilities are also includible in the gross amount and service tax collected accordingly. "
31. Further in the case of M/s. Infinity Logistics, Mumbai it appears that the said assessee has provided courier agency service to M/s. Infinity Logistics, Mumbai as the said assessee made arrangement for delivery of the goods belonging to M/s. XL Telecom and Energy Ltd, Secunderabad from India to Madrid, Spain. They delivered the goods through M/S. Federal Express Corporation. M/s. Federal Express Corporation issued Airway bill in the name of M/s. XL Telecom and Energy Ltd, Secunderabad as a shipper; Isolux Ingenieria SA Spain, Madrid as a consignee and M/S. Infinity Logistics, Mumbai as issuing carrier's agent. The said assessee issued invoice to M/S. Infinity Logistics, Mumbai and charged on the basis of weight of the consignment. On verification of ledger account for the period 2008-09 in respect of M/s. Infinity Logistics, Mumbai it appears that the said assessee has raised invoices amounting to Rs. 2,12,38,241/- showing sales as International Courier (Mum). The assessee in reference to the above, has vide letter dated 24.12.2012 submitted as follows:
"As regards para 10 of the show cause notice, it is clear from reading of the facts reproduced therein that we had raised invoices against M/S. Infinity Logistics. M/s. Infinity Logistics is not the customer whose goods or documents were to be transported. As mentioned in para 10, the goods are of M/S. XL Telecom & Energy Ltd., Secunderabad and were to be transported to Spain. The goods were transported through airway bill of M/s. Fedral Express Corporation and 9 Appeal No. ST/11251/2014 & ST/11046/2015-DB the airway bills were issued in the name of M/S. XL Telecom & Energy Ltd. We had arrangement with M/s. Fedral Express Corporation and therefore, in order to recover the charges of Federal Express Corporation, we had raised bills against M/S. Infinity Logistics. M/S. Infinity Logistics had, in turn, issued the bills to M/S. X L Telecom & Energy Ltd. Thus, the customer is M/s. X L Telecom & Energy Ltd. and to this customer, services were provided by M/S. Infinity Logistics"
A plain reading of above submission reveals that :
(a) M/s. Infinity Logistics was not the customer whose goods or documents were to be transported
(b) Goods belonged to M/s. X L Telecom & Energy Limited, Secunderabad and were to be transported to Spain
(c) The goods were transported through airway bill of M/s. Federal Express Corporation and the airway bills were issued in the name of M/s. X L Telecom & Energy Limited.
8. It is not understood as to why the assessee would raise the bill to M/s. Infinity Logistics and M/s. Infinity Logistics would further raise the bill to M/s. X L Telecom & Energy Limited, Secunderabad when both of them were not in the picture as the goods belonging to M/s. X L Telecom & Energy Limited, Secunderabad were transported by M/s. Federal Express Corporation and the airway bill were issued in the name of M/S. X L Telecom & Energy Ltd. This is nothing but modus adopted by the assessee to show transaction on paper only and thereby evade payment of service tax. It appears that in this case also the assessee had provided courier service to M/S. X L Telecom & Energy Ltd."
9. We have examined the shipping documents of the above consignments. In the case of GIHED documents, the appellant has billed the multiple exhibitors of GIHED in their individual names C/o GIHED Stall No., Penta Freight Pvt. Limited has billed in the name of appellants while issuing Housed Airway Bill in the name of GIHED, Ahmedabad with destination at GIHED, World Gujarati Conference, USA and airlines Jet Airways/Continental Airlines has issued Air-Way Bill to Penta Freight Pvt Limited. Whereas the bills issued by the appellants to individual exhibitors ranges approx. from 250 Kgs to 1000 kg. per consignment, Housed Airway Bill/ Airway Bill issued by Peta prefight Pvt Limited/ Airlines are 5000 Kg. plus thus aggregating 10 Appeal No. ST/11251/2014 & ST/11046/2015-DB multiple consignments of the exhibitors. The description as per Airway Bill reads as " Exhibition cargo as for display purposes only".
10. In the case of Infinity Logistics, the Appellant has billed to Infinity Logistics for consignments weighing 4600 Kgs. To 13800 Kgs. And Fedex Express has billed to the Appellant for these weights of 4600 Kgs to 13800 Kgs. and in the airway bill showing the shipper as XL Telecom & Energy Limited Secunderabad and consignor M/s. Isolux Ingenieria, Spain with description of goods as "Solar Photovoltaic Modules".
11. On examination of the documents issued for the above two consignments we are convinced that the consignments transported were "Freight Cargo" and not the courier consignments. We have a considered view that "courier agency service" is an alternate to "postal service/ postal parcel service". The definition as provided under the Finance Act reads as under:
'courier agency' means any person engaged in the door-to-door transportation of time sensitive documents, goods or articles utilizing the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles;"
As interpreted by the Hon'ble Gujarat High Court, for a person to fall within the ambit of "courier agency" as defined under Clause (33) of Section 65 of the Act, the following ingredients would be required to be satisfied :
(i) Such person should be engaged in door-to-door transportation;
(ii) the transportation should be of time-sensitive documents, goods or articles;
(iii) such transportation should be carried out by utilising the services of a person, either directly or indirectly.
(iv) the person whose services are so utilised should carry or accompany such documents, goods or articles.
12. It would be pertinent to mention that the "time sensitive documents, goods or articles" would be such volume/ weight that an individual could handle the same and deliver it personally. The expression "utilizing the services of a person" to our view mean that the "person"
11Appeal No. ST/11251/2014 & ST/11046/2015-DB here means an individual and not a juristic person. As is a trade practice and as suggested by the above definition, small goods or articles capable of being handled and delivered by an individual would be covered under the definition of courier service. Larger consignments howsoever may be time sensitive or the requirement for door-to-door delivery, would not be classified as courier services but as cargo. Another factor which is crucial to examine is that normally a courier agency aggregates small consignments of documents, goods or articles and there are different senders and the place of destination for door-to door delivery. When many persons avail services of a transporter in pursuance of a common business (like the exhibition in GIHED cargo discussed above), and a huge cargo load comprising in tons is delivered at a particular destination, such a transport cannot be considered to be a "courier agency service" but would fall under the cargo service.
Therefore, in our considered view both the above specific cases of GIHED and the Infinity Logistics would not be covered under the service of "courier Agency Service". Further, in our considered view when a "courier agency service" is provided for door-to-door delivery, all the transporters taking responsibility to deliver the consignment from the booking stage to the final door delivery would fall under the courier agency service and the cascading effect of taxation can be avoided by input credit claim. It is now well established that a sub-contractor is obliged to discharge tax independent of the main contractor.
13. As already stated unfortunately we have no record/ data to examine other than the above two specific consignments, we are constrained to remand back the case to the original authority to examine the documents of the appellants afresh in the light of above observations. We refrain from passing further orders on limitation and other aspects which would be examined afresh based on the documents and explanations submitted by 12 Appeal No. ST/11251/2014 & ST/11046/2015-DB the appellants during denovo proceedings. The appellants would be allowed to present any document, take any fresh ground during the denovo proceedings.
(Pronounced in the open court on 24.09.2024) (Ramesh Nair) Member (Judicial) (C L Mahar) Member (Technical) KL