Custom, Excise & Service Tax Tribunal
Narendra Road Lines Private Limited vs Agra on 11 March, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO. I
SERVICE TAX Appeal No. 70407 of 2017
(Arising out of Order in AppealNo. AGA-EXCUS-000-COM-0036-16-17 dated
16.3.2017 passed by Commissioner (Appeals), Central Excise & Central Goods
and Service Tax, Agra)
M/s. Narendra Road Lines P. Ltd. ...Appellant
Narendra House, Firozabad Road,
Near Shahadra Crossing, Yamuna Bridge,
Agra, UP
Versus
Commissioner of Customs, ....Respondent
Central Excise& Central GST, Agra 113/4, Sanjay Place, Agra and SERVICE TAX Appeal No. 70408 of 2017 (Arising out of Order in Appeal No. AGA-EXCUS-000-COM-0036-16-17 dated 16.3.2017 passed by Commissioner (Appeals), Central Excise & Central Goods and Service Tax, Agra) Hari Mohan Garg ...Appellant Director of M/s. Narendra Road Lines P. Ltd.
Narendra House, Firozabad Road,
Near Shahadra Crossing, Yamuna Bridge,
Agra, UP
Versus
Commissioner of Customs, ....Respondent
Central Excise & Central GST, Agra
113/4, Sanjay Place, Agra
APPEARANCE:
Mr. B.L. Narsimhan, Advocatefor the appellant Mr. Amit Bhardwaj, Authorised Representative for the Respondent CORAM :HON'BLE Mr. Ashok Jindal, MEMBER (JUDICIAL) HON'BLE Mr. P. Anjani Kumar, MEMBER (TECHNICAL) Date of Hearing:8.3.2022 Date of Decision: 11.3.2022 FINALORDER No.70078-70079/2022 2 ST/70407/2017 ST/70407/2017 ASHOK JINDAL These appeals are against the impugned order confirming the demand of service tax against the appellants under category of supply of tangible goods for use service and imposition of penalty.
2. The brief facts of the case are that the appellant is engaged in providing transportation services to its clients using its dumpers, tippers, trucks, trailers, etc. and is registered with the Department under the category of Goods Transport Agency Services. During the relevant period i.e. April 2011 to March 2016, the appellant carried out the following activities:
a) Transportation of goods with or without issuance of consignment notes.
b) Hiring of vehicles to other GTA service providers, who have issued consignment notes to their clients.
c) Transfer of right to use goods.
3. In case, where transportation activity was carried out by the appellant and consignment note were issued, the liability to pay service tax was shifted to the service recipients under reverse charge mechanism and service recipient in such cases had paid the service tax under the category of Goods Transportation Agency services under reverse charge mechanism. The appellant also transported the goods by road without issuing consignment notes and such activity was not classifiable under any category of Goods Transport Agency services. For the period till June 2012 and later on it was covered under notifications and negative list with effect from July 2012. The appellant also hired vehicles to other GTA 3 ST/70407/2017 ST/70407/2017 service providers who in turn issued consignment notes to their client. The said activity was exempted under notification no. 1/2009-ST dated 5.1.2009upto June 2012 and notification no. 25/2012-ST dated 20.6.2012 for the period thereafter. Therefore, the appellant did not pay service tax on such services. In some cases, the appellant transferred the right to use vehicles to its clients and such activity was also not covered under Supply of Tangible Goods prior to June 2012 as the possession and control was given to the person who took right to use. Such activity amounts to deemed sale covered by negative list from July 2012,in such cases, the appellant discharged service tax on these activities for the period 2015-16.
4. Pursuant to the investigation carried out by the Department, the SCN was issued to the appellant by invoking extended period of limitation based on a single agreement with M/s. JMC Project (I) Ltd. (JMC) alleging that the services provided by the appellant falls under the category of Supply Of Tangible Goods For Use Services and it has fraudulently taken registration under the category of GTA services. It was also alleged that in Balance sheet, the amount is shown as received for hiring charges, which is the only system of revenue generation. Therefore, the demand service tax amounting to Rs.20,97,73,103/- along with interest and imposition of penalty on both the appellants was proposed. During adjudication, the adjudicating authority dropped the demand of Rs. 4,96,02,479/- and interest and penalty pertains to agreement with JMC but remaining demand has been confirmed along with interest and 4 ST/70407/2017 ST/70407/2017 penalties were imposed on both the appellants. Against the said order, the appellants are before us.
5. The learned Counsel for the appellant submits that the entire demand was liable to be set aside once the demand on contract with JMC Project (I) Ltd. was dropped in the impugned order, since the said contract formed the basis of the entire demanding the show cause notice. He further submits that the burden to prove the taxability is on the Department and it has miserably failed to discharge the same. He also submits that the liability to pay service tax in the case of GTA lies on the service recipient under reverse charge mechanism for the transportation of goods other than GTA is not chargeable to service tax. He also submits that where right of effective control and possession has been transferred to the client, therefore, the said activity does not fall under the supply of tangible goods services. To support this contention, he relied on the decision in the case of Great Eastern Shipping Company ltd. v State of Karnataka 2020 (32) GSTL 3 (SC), Petronet LNG Ltd. v Commissioner of Service Tax, New Delhi 2016 (46) STR 513 (Tribunal Delhi).
6. He finally submits that the service tax is not payable in respect to the vehicles provided to GTA. Exemption from payment of services has been granted vide notification no. 1/2009-ST dated 5.1.2009 for the period upto June 2012 and Notification no. 25/2012-ST dated 20.6.2012 for the period from July 2012 onwards. In alternate, he submits that appellant is entitled for tax cum benefit and the appellant shall be eligible to avail Cenvat 5 ST/70407/2017 ST/70407/2017 Credit on input, input services and capital goods. He also submits that extended period of limitation is not invokable in the facts of the case. Consequently, interest and penalty is not imposable.
7. On the other hand, learned AR submits that in this case, it is important to mention that in respect to so called service of transportation with or without issuance of the consignment note as categorised by the appellant, it was necessary to go through the legal provisions, GTA services and supply of tangible goods for use of services adjusted prior to 1.7.2012. It is also submitted that the appellant submitted copies of agreement with JMC, Afcons Infrastructure Ltd. (Afcon) and L&T Ltd. with their defence explanation. But during the course of investigation, only agreement with JMC was provided and other contract of Afcon and L&T ltd. were supplied during the reply to the show cause notice. Further job work orders of Steel Authority of India Ltd. along with copies of invoices and consignment notes on 17.2.2017. In the agreement / work order with JMC which has also been relied upon by the Department, the main work was allotted to appellant as mentioned in the subject of said work order was "Revised work order for transportation of material from Mertha Crushing Plant to Hathras and in the case of M/s. Afcon, transportation of aggregate from crusher site at Mahipalpur, Rajasthan to Camp A at Katphori and Camp B at Saifai, UP. In the case of L&T the work was contracted to sub contractor for transportation of approved quantity Granular Sub Base material as per Table 400-1 (Grading -1) for Delhi Agra Road Project.
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ST/70407/2017 ST/70407/2017
8. In the case of JMC, Afcons and L&T Ltd., the adjudicating authority accepted the claim of the appellant that the main activity carried out by them was transportation of goods and these companies are body corporate and are liable to pay service tax on transportation of goods by road in a goods carriage under reverse charge mechanism. As is in these cases, the contracts / work order clearly spell out that the activity was transportation of goods by road and JMC has also confirmed that they have paid service tax on GTA services provided by the appellant under Reverse Charge Mechanism, the demands were dropped. Further, the appellant themselves have intimated that they have received the amount of Rs. 16,17,43,416/- against the GTA service during this period and on these services and only tax was paid of the amount of Rs.8,92,487/-. Therefore, the said amount pertains to consideration received against the supply of tangible goods for used services. Further, it was alleged that appellant has not provided all the work orders. Therefore, the adjudicating authority has rightly confirmed the demand against the appellant and imposed the penalties on both the appellants.
9. Heard the parties and considered the submissions.
10. We have gone through the records placed before us and the show cause notice dated 9.9.2016 wherein the agreement contract dated 8.2.2011 with JMC Project India Ltd. Mumbai was examined and on the basis of that agreement that contract, it was alleged that appellant is engaged in providing taxable service under the category of supply of tangible goods service. The said show cause 7 ST/70407/2017 ST/70407/2017 notice has been adjudicated by the adjudicating authority and the adjudicating authority has recorded as under:
"34.1 Noticee further argued that the whole demand in the Impugned SCN has been made on the basis of single contract with M/s JMC Projects (1) Ltd. (in short JMC"). whereas they have also provided such services to other service recipients. The nature of work in this case is transportation of goods and not in the nature of supply of tangible goods for use. As per the Agreement, they have to transport aggregate/ boulder/ GSB from Mertha Crushing Plant in Bharatpur (Raj.) of JMC to Hathras Yard of JMC in U.P. for construction of Agra-Aligarh Road Project awarded to JMC. They further submitted that in the case of STGU Service, the use of tangible goods is in the hands of service recipient only and scope of service provider is only limited to supply of such goods for use. In the instant Agreement, Noticee was required for all expenses viz. labour, equipment, salary of driver/ helper, cost of fuel, spares, lubricants toll charges, applicable taxes/ levies, insurance etc. for due performance of work under the contract with JMC. In this case, the amount received is dependent upon the quantity of goods actually transported and distance covered by shortest route with weighment of goods at loading and unloading site. Thus, as per the Agreement/ Contract, they have not supplied tangible goods for use to JMC but they transported goods of JMC from their one site to another, which is not covered under STGU Service but under Goods Transport Agency (GTA) service on which JMC was liable to pay Service Tax under reverse charge mechanism. Similarly, they also entered into contact dated 06.10.2015 with M/s Afcons Infrastructure Ltd.) for transportation of aggregates 8 ST/70407/2017 ST/70407/2017 from Mahalpur (Raj.) &Jignia. Gwalior (MP) to Firozabad/ Etawah for construction of Agra-Lucknow Expressway. Similar Agreement dated 01.10.2014 was also entered with M/s Larsen & Toubro Ltd. (in short 'L&T Ltd.') for transportation of material. Thus the principal activity carried out by them was transportation of goods which is much specific than supply of tangible goods for use."
11. Thereafter, the adjudicating authority held as under:
"35.1.3 I find that in the case of JMC, Afcons and L&T Ltd. as far as the contracts are concerned, I accept the claim of Noticee that the main activity carried out by them was transportation of goods and these companies are body corporate and are liable to pay service tax on transportation of goods by road in a goods carriage under Reverse Charge Mechanism, as in these cases the contracts/ work order clearly spell out that the activity was transportation of goods by road and JMC has also confirmed vide their letter dated 24.05.2016 that they have paid service tax on GTA Service provided by Noticee under Reverse Charge Mechanism for the period 2011-12 to 2014-15 on the transportation charges paid to Noticee amounting to Rs.16,08,50,929.00/- whereas, the Noticee has intimated that they have received an amount of Rs.16,17,43,416.00/- against GTA Service during this period. Thus, the service fax was not paid on the amount of Rs.8,92,487.00/-. Further, as per details available on records, the Noticee has not received any amount from JMC during 2015-16. However, as per said letter of JMC, they have not paid any service tax on the value of services 9 ST/70407/2017 ST/70407/2017 provided under the category of STGU service. I therefore, find that the aforesaid difference of Rs. 8,92,487.00/- in both amounts also pertains to considerations received against STGU Service. As regard the contract with Afcons, the Noticee has submitted copy of only one consignment note No. 201 dated 06.04.2015 involving transportation charges of Rs.28,000.00/- whereas they have received the amount of Rs.5,62,68,410.00/- from Afcons during 2015-16. However, the contract with Afcons is for transportation of goods, but in absence of consignment notes, the entire amount received by Noticee from Afcons cannot be treated as received against this contract, because for the purpose of GTA service issuance of consignment note is mandatory condition under the provisions of Rule 4B of the Rules. I further find that in the case of L&T Ltd., the Noticee has submitted copies of two Bills No. 0308 dated 19.07.2014 and 360 dated 31.07.2014 issued to said party for the amounts of Rs.37,11,677.00/- and Rs.41,21,072.00 respectively. Here also in the column of GR No. is left blank, which shows that GRS/ Consignment Notes have not been issued in this case also and such Bills cannot be treated as consignment notes."
12. As the basis of issuance of show cause notice is the contract between appellant and JMC India Ltd., Mumbai and after examining the said contract with M/s. JMC, the alleged demand under the category of supply of tangible goods for use has been dropped by the adjudicating authority and said finding of the adjudicating 10 ST/70407/2017 ST/70407/2017 authority has not been challenged by the Department and no other contract is the basis of issuance of show cause notice, in that circumstances, the demand against the appellant is not sustainable.
13. Further, on merits also we have examined that the appellant has carried out 3 type of activities:
a) Transportation of goods with or without issuance of consignment notes.
b) Hiring of vehicles to other GTA service providers, who have issued consignment notes to their clients.
c) Transfer of right to use goods.
14. Admittedly, wherein the goods transportation activity has been carried out and consignment note has been issued by the appellant, the appellant is not liable to pay service tax but the service recipient is liable to pay service tax under the reverse charge mechanism and it is recorded by the adjudicating authority in the impugned order that service recipient has discharged service liability thereof. Therefore, the said allegation is not sustainable. In some of the cases the appellant transported the good by road without issuance of the consignment note, the said activity prior to June 2012 was not classifiable under category of services as no consignment note was issued and it is prime requirement to demand service tax under the category of good transport agency service. Further, the appellant has hired out vehicles to other GTA service providers, who have issued consignment notes to their clients. Such activity of the appellant was also exempt under 11 ST/70407/2017 ST/70407/2017 notification no. 1/2009-ST dated 5.1.2009 for the period prior to 30.6.2012 and exempt under notification no. 21/2012-ST dated 20.6.2012 for the period post July 2012. From the records, we also find that appellant has transferred the right to use vehicle to its client and such activity was not covered under supply of tangible goods service prior to June 2012 as the possession and control was also given to the person who had the right to use the goods and such activity amounts to deemed sales covered in negative list from July 2012. But the appellant has discharged the service tax liability from the period 2015-16 in such cases.
15. In view of the above, we do not find any merit in the impugned order. Therefore, the same is set aside and in result appeals are allowed with consequential relief, if any.
(Order pronounced in the open court on 11.3.2022) (ASHOK JINDAL) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) Bhanu