Custom, Excise & Service Tax Tribunal
Ms Krati Enterprises vs Cgst Lucknow on 24 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70410 of 2019
(Arising out of Order-in-Original No.05/ADJ./COMMR./2018-19 dated
28/02/2019 passed by Commissioner, CGST & Central Excise, Audit
Commissionerate, Lucknow)
M/s Krati Enterprises .....Appellant
(B-22, Mlaviya Nagar, Aishbagh, Lucknow-226004)
VERSUS
Commissioner of Central Excise & Service Tax, Lucknow
....Respondent
(7-A, Ashok Marg, Lucknow) APPEARANCE:
Shri Dharmendra Kumar, Chartered Accountant for the Appellant Shri Sandeep Pandey, Authorized Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.-70190/2024 DATE OF HEARING : 04.01.2024 DATE OF DECISION : 24.04.2024 P. K. CHOUDHARY:
Present appeal has been filed by the Appellant assailing the Order-In-Original No. 05/ADJ./COMMR./2018-19 dated 28/02/2019 passed by Commissioner, CGST & Central Excise, Audit Commissionerate, Lucknow.
2.1 The facts of the case in brief are that the Appellant is providing 'Clearing & Forwarding Agent Services' to their Principal i.e. M/s Ultra Tech Cement Limited1 and the scope of work undertaken by them included the activities of unloading the 1 UTCL 2 Service Tax Appeal No.70410 of 2019 consignment of Cement from Railway rake at Lucknow, upliftment of such consignment of Cement from railway siding, managing the transportation of such goods from railway siding to company's various godowns as well as to their own godowns and also managing the transportation & delivery of the said goods from the godowns to Company's various dealers, stockists and to the individual customers as per the instructions issued by the company. At times, they also managed the transportation of the goods (Freight Forwarding) directly from Railway Siding to the Customer's end.
2.2 To carry out the above activities, the assessee entered into two agreements. One as 'Handling Agent Agreement' dated 28.05.2015 and the other as 'Transport Agreement' dated 28.05.2015.
2.3 As per the 'Handling Agent Agreement' scope of work is as under:-
"B. The Company requires an agent i. To handle the arrival of the material such as unloading, loading, security, etc. at Rake point/Railway siding/Railway platform and subsequently to transport the material from rake point/railway siding/Railway Platform to the respective Godowns.
ii. To take care of Cement handling at the Company's Godown as Specified in this Agreement.
C. The Handling Agent is having necessary professional experience, expertise, resources, man power and infrastructure to carry out the handling work and is also having all necessary permits, licenses and other authorization to perform transportation services.
D. The Handling Agent will unload the cement from the Rakes at railway head/railway si ding/platform and load into the vehicles and transmit them to the respective godowns as intimated by Company."
3 Service Tax Appeal No.70410 of 2019 2.4 And as per the 'transport agreement' the scope of work is as under:-
"B. The transporter is desirous to act as one of the Secondary Transporter of the company to perform company's transportation services intrastate and interstate as specified in this agreement."
2.5 Show cause notice dated 16.07.2018 was issued alleging that the Appellant had not discharged Service Tax on the incomes shown under the head 'Freight Reimbursed' and 'Miscellaneous Expenses Reimbursed' in their Balance Sheet as well as in their ledger with respect to 'Freight Claim' & 'Miscellaneous Claim' during the financial year 2012-13(From October 2012) to 2016-17.
2.6 After the due process of law, demand of service tax amounting to Rs.2,72,92,383/- as proposed in the show cause notice was confirmed alongwith applicable interest on 'Freight Reimbursed' & 'Miscellaneous Expense Reimbursed' received from M/s UTIL. Penalty of equal amount was also imposed under Section 78 of the Finance Act, 1994. Hence, the present appeal before the Tribunal.
3.1 We have heard Shri Dharmendra Kumar, Chartered Accountant for the Appellant and Shri Sandeep Pandey, Authorized Representative for the revenue.
Appellant acted as a Pure Agent in terms of Rule 5(2) of Service Tax (Determination of Value) Rules, 2006. The C & F Agent and Transportation Services are two independent services and were rendered under two separate contracts, and therefore, the consideration for both the services cannot be clubbed together to levy Service Tax under the single service category of C & F Agency service. This will be contrary to the Principle of classification of services as provided under Section 66 F of the Finance Act, 1994.
4 Service Tax Appeal No.70410 of 2019 The Appellant has never rendered or claimed reimbursement for freight services.
As per trade notice No. 87-97/ST dated 14/07/1997 issued by Madurai, Commissionerate, Transportation Service was liable to service tax under reverse charge at the hand of the consigner or consignee, even when these services were procured by C & F agent. Accordingly, no fresh liability of service tax can be imposed on the Appellant as UTCL as already discharged applicable service tax under reverse charge in accordance with the provisions of Finance Act and Rules.
Similar is stated in CBEC Circular B-11/1/2002/TRU dated 01.08.2002.
The extended period of limitation is not invokable in the present case on account of the fact that the M/s UTCL was discharging service tax under the reverse charge and also the question involved interpretation of law. Further, the whole exercise would also be revenue neutral in view of available credit to the M/s UTCL on the service tax paid by the Appellant. Accordingly, the demand for January, 2013 to March 2013 was also pleaded to be time barred.
3.4 Learned Departmental Representative reiterated the findings of the impugned order.
4.1 We have considered the impugned order along with the submission made in appeal and during the course of arguments.
4.2 Demand has been confirmed against the appellant both on merits and by holding that extended period of limitation would be invokable in the present case. For holding against the appellant on merits the impugned order records the findings as follows:
"The issue is to be decided whether service tax is payable by the Noticee on amount received as "Freight Reimbursed" and "Miscellaneous Expense Reimbursed" from M/s UltraTech Cement Limited (M/S UTCL) under proviso 1 to section 73 of the Finance Act, 1994 26.1 Issue No.1
5 Service Tax Appeal No.70410 of 2019 First of all, I come to the point, whether the Noticee is required to deposit Service Tax on amount received as Freight Reimbursed" and "Miscellaneous Expense Reimbursed" from M/S UTCL. Regarding the "freight reimbursed" the department is of the view that whole activity carried out by the Noticee is connected with Clearing & Forwarding Agent Service. Mere segregating the agreements, the activity of making arrangement of secondary transportation can not be treated as GTA service. While regarding the "miscellaneous expense reimbursed", the department is of the view that these reimbursements will be part of taxable value while paying service tax by the Noticee against the service of clearing and forwarding agent service provided to M/S UTCL.
However, the contention of the Noticee is that the "freight reimbursement" is the amount received for providing GTA Services to M/s UTCL and M/S UTCL are paying service tax under reverse charge mechanism while regarding "miscellaneous expense reimbursement", the Noticee has pleaded that this reimbursement is on account of amount paid to railways in respect of demurrage / wharfage. First of all, I would like to discuss the facts present in the case before me. The Noticee enters into two agreements with M/s Ulta Tech Cement Limited (M/S UTCL) (i) Handling Agent Agreement &(ii) Transport Agreement. By the Handling Agent Agreement, the Noticee has been awarded to carry out unloading wagons to the platform, loading of goods from platform to trucks, local transportation i.e. from railway siding to warehouse of M/S UTCL / Godowns etc. and unloading of trucks at warehouse / godown. The Noticee has paid service tax whatsoever received by the Handing Agent Agreement under the Clearing & Forwarding Agent Service. Further, under the Transport Agreement the Noticee has been awarded to carry out the secondary transportation i.e. transportation of goods from warehouse / godown to the stockiest / dealer / end customer of M/S UTCL or transportation of goods from railway siding to the stockiest / dealer / end customer of M/S UTCL. On going through the Annexure-l to said agreement, I find that M/S UTCL has fixed the rate of transportation for different destinations in terms of per metric tons in unit i.e. the Noticee has been given at the fixed rate (Rs. per metric ton) for different destinations which has been decided in the agreement. In addition to this consideration, the Noticee has received ₹12/- per metric ton as service charges which is clearly mentioned in the Annexure-l of the Handling Agent Agreement. Now coming to the contention of the Noticee that they have provided GTA Service to M/s UTCL and M/s UTCL has paid 6 Service Tax Appeal No.70410 of 2019 Service Tax on the amount of "Freight Reimbursement"
under reverse charge mechanism.
However, I do not find any merit in the contention of the Noticee for following reasons. The Noticee is charging some extra consideration as "Service Charges" over and above of transportation charges. As per Section 658(26) a "Goods Transport Agency" means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. Goods Transport Agent issues consignment note / Invoice / Bill containing all its particulars i.e. the amount contains all cost including profit also. They never issue separate invoice/ bill for their service charges consisting their profit portion. Moreover, I find that the Noticee is facilitating M/S UTCL for the arrangement of secondary transportation and charging extra consideration as "Service Charges" in addition to "freight reimbursement" which is nothing but part and parcel clearing and forwarding agent service. Therefore, the Noticee has not received "freight reimbursement" for mere transportation of goods for outward transportation under GTA Service but the act of the Noticee is more acquiescent than of a goods transport agent. The Noticee has submitted a demand draft of ₹57,954/- in the name of M/S UTCL as security deposit. The Noticee is fully responsible for safety and good condition of the consignments from the time of collection of goods from railways siding till the actual delivery of the goods. Further, the Noticee is also required to submit bills on fortnightly basis alongwith copy of GCN / LR / Delivery Note and full details of consignment transported outward and only thereafter, the payments have been released to the Noticee. Moreover, the fixed charges were mentioned in Annexure-l of "transport Agreement" for different destination while the service charges i.e. ₹12/- per metric is mentioned in Annexure-I of "Handling Agent Agreement" which means these two agreements are well connected to each other. All these activities precisely cover by "Clearing &Forwarding Agent Service"
The Noticee has entered into two separate agreements for the whole activities of executing the work such as unloading of wagons to the platform, loading the goods from platform to trucks, transportation of goods from platform to godown of M/S UTCL / the Noticee / stockiest / dealers and unloading of the same, secondary transportation / outward transportation i.e. transportation of goods from godown of M/S UTCL / the Noticee / platform to end customer etc. However, it could not be said that income incurred from services should be excluded as they have entered into two separate agreements with M/S UTCL. In other words, the activity of outward transportation of consigned goods is basically a part of Clearing &Forwarding service and was 7 Service Tax Appeal No.70410 of 2019 required to be included in the most appropriated category of taxable service i.e. the valuation of the taxable service will be carried out in the service which is most essential as it is necessary in the case of bundle service. Therefore, I am of the view that secondary transportation is a part and parcel of clearing and forwarding agent service rather of GTA service. The claim of Noticee is also examined via-a-vis definition of Clearing &Forwarding Agent Services as quoted below:-
Section 65(25) of the Finance Act, 1994 provides the definition of Clearing &Farwarding Agent Service as below:-
(25 ) "clearing and forwarding agent" means any person who is engaged in providing any service elther directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent.
On plain reading of the above definition, I find that in the definition the expression 'directly or indirectly' has been used to cover all cases where the service provider deploys other person for some of the functions coming under the service. As discussed at the previous pages; the Notice has carried out following functions:-
(i) Clearing:- means goods were cleared from the premises wherein it was sent to them for lifting i.e.(in this case from railways station or siding) upto the Clearing &Forwarding Agent's premises / M/S UTCL's warehouse.
(ii) Forwarding:- means arranging further transportation to the ultimate buyers of those goods as per advise of the principals i.e. M/S UTCL Therefore, the complete chain of activities of Clearing & Forwarding is happening and that too only with the help of the Noticee. So, I find that the Noticee has undertaken all the normal activities of clearing & forwarding agent.
Therefore, in terms of Section 65 (25) and Section 658(44) of the Finance Act, 1994, the activity carried out by the Noticee for the said consideration (Freight Reimbursed) is found to be connected with the clearing &forwarding agent service. Further, Vivisection of a single &composite service is not permissible under the law. In this regard, want to place the reliance of the case of SINGH TRADING COMPANY VS. COMMISSIONER CENTRAL EXCISE, BHOPAL 2018(9) G.S.T.L.201(Tri.-Del.) wherein the Tribunal has stated "Since loading and unloading, handling and transportation of goods upto the destination was an integral part of C&F service, we are of the view that transportation charges alone cannot be bifurcated and charged separately to service tax under GTA service. Further, it is evident from the facts of the case that the appellant does not satisfy the condition of being 8 Service Tax Appeal No.70410 of 2019 considered as Goods Transport Agency, Consequently, we are of the view that the transportation charges received should form part of the consideration for C&F service.
"MISCELLANEOUS EXPENSE REIMBURSED"
Now regarding "miscellaneous expense reimbursement", the Noticee has pleaded that this reimbursement is on account of amount paid to railways in respect of demurrage / wharfage The word "Demurrage & Wharfage" is not defined in Service Tax Act. These words have been defined as below in Collins English Dictionary Demurrage::
• The delaying of ship, railway wagons etc caused by the charter's failure to load, unload etc before the time scheduled departure.
• The extra charge required as comparison for such delay.
• The compensation payable to a carrier of freight whose vehicle is delayed, as by failure to load or unload the freight within the time allowed.
Wharfage;- the use of a wharf for mooring, loading, or unloading a ship, or for storing goods.
In normal course, the railways charge the demurrage on delayed unloading of wagons at platform i.e. demurrage is charged by railways due to failure to unloading of wagons within time prescribed. Wharfage is charged by the railways due to non loading .of goods stored at platform within time i.e not cleared the platform within stipulated time limit. As for as the Noticee's contention that they have received the 'Miscellaneous Expense reimbursed' from M/S UTCL for the amount paid for demurrage and wharfage to railways on behalf of M/S UTCL and this amount is not taxable as they have received this amount from M/S UTCL as reimbursement of expenditure which they have paid to railways in the capacity of pure agency. I do not find any merit in the contention of the Noticee. In this regard I would like to reproduce the Section 67 of the Finance Act, 1994:-
SECTION [67., Valuation of taxable services for charging service tax-
(1) .....
In view of explanation to Section 67, consideration includes reimbursable expenditure also for the purpose of valuation of taxable service. Therefore, the amount of reimbursement received by the Noticee as 'Freight reimbursed' and 'Miscellaneous Expense Reimbursed' should be included in the taxable value for the purpose of payment of service tax.
9 Service Tax Appeal No.70410 of 2019 Further, I want to reproduce the relevant provisions of the Service Tax (Deterrmination of Value) Rules, 2006 as amended RULE 5. Inclusion in or exclusion from value of certain expenditure or costs. ....
In view of above Rule 5(1) of Service Tax (Determination of Value) Rules, 2006, it is clear that in the course of providing taxable services all the expenditure will be part of taxable value. Further, as per Rule 5(2) of Service Tax (Determination of Value) Rules, 2006, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service. Therefore, I am very much clear that, if any, expenditure incurred by the Noticee is in the capacity of pure agent of M/S UTCL, then it will not be the part of taxable value.
On precise reading of the Rule 5(2) of Determination of Value Rules, 2006, any service provider will be considered acting as pure agent of service recipient if they fulfill all the eight conditions, There are the following main ingredients to be a service provider as pure agent of recipients of service;-
(i) There is an agreement between service provider (the Noticee) and service receiver (M/S UTCL) to act as pure agent of service receiver.
(ii) The service provider (the Noticee) neither intends nor hold any title of services so procured or provided as pure agent.
(iii) The service provider (the Noticee) does not use such goods or services so procured.
(iv) The service provider (the Noticee) receives only the actual amount incurred to procure such goods or services I draw attention to the fact that the Hon'ble Supreme Court in the case, of Sharif-ud-Din Vs. Abdul Gani Lone AIR 1980 SC 303 had held as under:-
"The difference between a mandatory rule and directory rule is that while the former must be strictly observed, in the case of the latter substantial compliance may be sufficient to achieve the objective regarding which the rule is enacted, Certain broad provisions which can be deducted from several decisions of the courts regarding the rules of construction that should be followed in determining whether a provision of law is directory or mandatory may be summarized thus. The fact that the statue uses the word "shall" while laying clown a duty is not conclusive on the question whether it is mandatory or directory provision, In order to find out the true character of legislation, the court has to ascertain
10 Service Tax Appeal No.70410 of 2019 the object by which the provision of law in question has to subserve and its design and the context. In which it is enacted. If the object of a law is to be defeated non-compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act one is disregard of that provision causes serious prejudice to those for whose benefit it is enacted and at the same time who have no control over the performance of the duty, such provision should be treated as directory one. Where, however, a provision of law prescribes that a certain act has to done in a particular manner by a person in order to acquire a right and it is caupled with another provision which confers an immunity on another when such act is not done in that manner, the former has to be regarded as a mandatory one. A procedural rule ordinarily should not be constructed as mandatory if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage unless by according such permission to rectify the error later on, another rule should be contravened Whenever a statute prescribes that a particular act is to be done in a particular manner and also lays down failure to comply with the said requirement leads to a specific consequence, it would be difficult to hold that the requirement is not mandatory and the specified consequence should not follow."
Applying the above ratio, the provisions of Rule 5 of Service Tax Rules (Value of Determination), 2006 are mandatory in nature and the Noticee was required to strictly comply with it as non compliance would lead to penalty. Further in the case of State of Jharkhand Vs. Ambay Cement, Hon'ble Apex Court- 2004(178) ELT 55 (55) while allowing the appeal had held as under:-
25. In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rule must be strictly observed, substantial compliance might suffice in the case of a directory rule.
26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way, It is also settled rule of interpretation that where a statute is
11 Service Tax Appeal No.70410 of 2019 penal in character, it must be strictly construed and followed Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance of the same must result in cancelling the concession made in favour of the grantee-the respondent herein. But in the present case, the Noticee has failed to prove that they have received the actual amount what they have paid on behalf of M/S UTCL and they have neither submitted any documentary evidences in this regard. Therefore, the benefit of acting of pure agent cannot be given to the Noticee The Noticee has also claimed benefit of cum-tax as prescribed under proviso 2 of Section 67 of the Finance Act, 1994. Section 67(2) reads as under;-
(2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. On perusal of Section 67 of the Finance Act, 1994, it can be observed that whenever the gross amount charged for providing any service is inclusive of Service Tax, then the benefit of cum-tax-value is available to the Noticee. In the instant case, the Noticee has claimed that they have not charged the Service Tax on the amount received by them towards freight reimbursed and hence benefit of cum- tax-value should be available to them. However, in this regard, I find that the Noticee has not substantiated its contention with concrete documentary evidences such as all the invoices issued in respect of freight reimbursed. Further, the Noticee has also failed to prove that the Service Tax has not been collected by way of Debit / Credit Notes from the recipients of service. In absence of the documentary evidences, I am unable to appreciate this contention of the Noţicee and accordingly I dismiss the same. In this regard , I would like to reproduce the relevant para of the judgement given by the Hon'ble Allahabad High Court Bench in the case of U.G.SUGAR &INDUSTRIES LTD. Vs., COMMISSIONER OF CENTRAL EXCISE. MEERUT-// which is as below:-
"Once the defence was raised by the appellants, it was essentially for the appellants to lead necessary evidence in that regard. Mere raising of plea in answer to the show cause notice does not by itself mean the proof of correctness of such plea. When the plea relates to certain factual aspect, it is absolutely necessary for the person raising such plea to make the same good by producing sufficient evidence in support of such plea. Undisputedly, the appellants did not produce any such evidence in support of such plea."
12 Service Tax Appeal No.70410 of 2019 Therefore, in view of above discussions, I hold the demand raised in the demand-cum show cause notice. I am of clear view that the Noticee was required to include the amount received from M/S UTCL under the head of 'freight reimbursed' &'miscellaneous expense reimbursed' while paying service tax under clearing &forwarding agent service."
4.3 The two agreements have been perused by us very critically and we find that there is no interlinkage between the two, the first agreement was exclusively for C & F agent service while the second agreement was for the transportation of goods.
4.4 It is the case of the Appellant that in respect of the transport services as per the transport agreement, the same was segregated in two parts. First part was actual transport cost on which UTCL paid service tax under 'reverse charge mechanism'2 and the other part is 'service charges' for providing transportation services i.e. margin over and above transportation cost ,on which Appellant is paying the service tax.
Appellant being a proprietor and is engaged in providing 'Goods Transport Service' to UTCL, which a body corporate, and accordingly as per Notification No.30/2012-ST dated 20.06.2012 read with Section 68(2) of the Finance Act, 1994, M/s UTCL, being the service receiver was liable to pay the service tax under 'Reverse Charge Mechanism'. During the course of providing the services, the Appellant made some payments on behalf of its Principal M/s UTCL such as 'Demurrage Charges' and 'Wharfage Charges'. These charges were levied by Railways and Receipts/Bills were issued in the name of M/s UTCL. The Appellant paid and recovered only the amount that was paid to the Railways. Clause 3.6, 3.8 and 15 of 'Handling Agent Agreement' dated 28.05.2015 contains the terms and conditions in respect of payment of such charges and reimbursement thereof. These were accounted for in the books of account of the Appellant under the head 'Miscellaneous Expenses Reimbursed'.
4.5 The dispute in this case is for the inclusion of freight amount in the value of C & F service for which a separate 2 RCM 13 Service Tax Appeal No.70410 of 2019 agreement has been entered into with the principal, which we do not consider legally tenable. In the case of Gunesh India Pvt. Ltd [(2023) 6 Centax 58 (Tri.-Del)] in similar type of arrangement with M/s Ultra Tech Cement Ltd Delhi Bench has held as follows:
"3. The Appellant is engaged in the business of providing different services to M/s. Ultratech Cement Ltd. (for short 'Ultratech') and to other service recipients. The activities of the Appellant carried out during the relevant period are divided into the following categories:
(a) Clearing & forwarding agent services (for short 'C&F services') to Ultratech [the Appellant has paid Service Tax on such transactions during the relevant period and reflected the same in ST-3 returns]; and
(b) Transportation of goods by road( (i) with issuance of consignment notes for Ultratech, on which Service Tax is paid by Ultratech under reverse charge mechanism under transportation of goods by road service (for short 'GTA service'), and (ii) without issuance of consignment notes from other GTAs, on which no Service Tax is payable).
4. These services are provided by the Appellant under different agreements with Ultratech and other service recipients. The classification of such independent services provided under different agreements is determined accordingly by the Appellant in the aforesaid manner.
19. The learned Counsel for the Appellant have taken us through few sample agreements which have been relied upon in the show cause notice. Agreement dated 04/11/2014 has been labelled as 'Rake Handling Agent Agreement'. This agreement is entered into between Ultratech Cement Ltd and M/s S S Enterprises (proprietor Gunesh India private Ltd). Under the clause, scope of work contained in para 2 of the agreement, it is provided that the appellant-assessee shall call the company officials/depot incharge every day to receive instructions regarding arrival of Rakes at the railway siding situated at Kota RH and also collect information regarding arrival of rakes from the Railway Office. The appellant is also required to track the consignment from the railway online system. Further, the appellant is required to arrange to unload the cement from the rake and to clear the consignments from the railway siding within the free time allowed by the Railways without incurring any demurrage/wharfage etc. Further, the appellant is required to co-ordinate for placement of loaded trucks from railway platform/goods/godowns to the various godowns on regular basis. The list of such godowns is as per the approved freight list. In case of emergency, as per the 14 Service Tax Appeal No.70410 of 2019 instructions of the company, the trucks/vehicles carrying the consignment can be diverted to other specified godowns and the appellant shall be obliged to honour such instructions. The appellant is also required to co-ordinate with secondary transporter engaged by the company to load the cement against orders of customers as per the instructions of company officer. In case, any truck of customer is placed, than the same will also be loaded as per the company's instructions. Admittedly, under this agreement the appellant have deposited the service tax on the full value of consideration and there is no dispute in this regard.
20. We further find, as regards the transportation agreement dated 27/09/2014 between Ultratech Cement Ltd and the appellant, wherein the appellant is engaged to undertake only pure transportation activity of cement bags from one place to another. The scope of work as provided in the para- 2 of the agreement (RUD-2), provides that the appellant shall place trucks for transportation of consignment of the company from railway platform/shed/godown to the various destinations including those of dealers/stockist/individual customers as per the company's instructions on regular basis. The transport work shall be mainly carried out to different places in Rajasthan from Mata ka Than godown under Jodhpur depot. The list of specified destinations is as per the approved freight list forming part of the agreement. The other conditions are similar to the earlier agreement referred to hereinabove. Thus, we find that under this agreement under the scope of work, the appellant have correctly treated the work as GTA service and service tax have been rightly discharged by the recipient- Ultratech Cement Ltd under Reverse Charge Mechanism. Thus, the confirmation of demand on the appellant is bad and accordingly set aside.
21. Now we deal with the issue, where the appellant is not the GTA. The appellant have facilitated the transportation, the services have been provided by other GTA who have raised the consignment note. As per agreement the appellant have only facilitated the transportation and have collected the transportation charges from the service recipient. We find that such services are not taxable and are covered under the negative list of services as provided in section 66 D (P) of the Act, and thus are not taxable.
22. Under the facts and circumstances, we also find that there is no case of suppression, contumacious conduct or mis-statement on the part of the appellant. Accordingly, we hold that the extended period of limitation is not attracted and have been wrongly invoked by revenue. 10. We also find that the rulings relied upon by the Revenue are not relevant and are distinguishable in the facts and circumstances of this case.
15 Service Tax Appeal No.70410 of 2019
23.We further find that the facts herein are similar to the facts in the case of Jain carrying Corporation v. CCE 2014- TIOL-3069-CESTAT, Delhi, wherein the assessee entered into a contract for providing 3 different services:- The first service was cleaning of mining area by undertaken various activities which would get covered under the head site formation and clearance, excavation and earth moving and demolishing services. The second category of service is merely for transportation of gypsum from one place to the railway station and would appropriately fall under GTA service. The third service required assessee to undertake activity of loading of gypsum into railway wagons/rakes by using mechanical loaders. Revenue wanted to classify the aforementioned three services under 'cargo handling service'. This Tribunal held that the contract may be a composite contract but three services were clearly mentioned separately with separate rates for the same as indicated against each of the service. It was further observed that site formation and cleaning service was brought into tax net w.e.f. 16/06/2005 and GTA service w.e.f. 01/01/2005 from which dates, the appellant was paying service tax. The Tribunal held that there is no justifiable reason to hold that the two services shall form part and parcel of 'cargo handling service'. Accordingly, the appeal was allowed, the said judgement was further carried in appeal before Hon'ble Supreme Court, the Hon'ble Supreme Court upheld the order of this Tribunal reported at 2015 (39) S.T.R. J 370(S.C.)."
The demand in terms of the above decision which is squarely on the same set of facts have been set aside both on the merits and also limitation.
4.6 Relying on various past precedents Ahmedabad Bench has in case of Kalpataru Power Transmission Ltd. [2021 (48) G.S.T.L. 354 (Tri. - Ahmd.)] observed as follows:
"6.7 This is not a case where the service provider i.e. appellant and the service recipient i.e. EDAs have colluded and with intention to evade service tax entered into two contract one for supply of goods and other for providing service of erection, installation and commissioning of transmission line. In the bid document itself which was offered by the service recipient put a clear condition that two separate contracts need to be entered into i.e. one for supply of service and other for supply/sale of goods therefore, both the contracts are separate contract and cannot be clubbed together.
6.8 As per the definition of the Works Contract Service one of the condition is that the property in goods used in 16 Service Tax Appeal No.70410 of 2019 execution of works contract must be transferred during the execution of contract. In the present case the appellant while clearing the transmission towers from their factory issued the sale invoices accordingly, the property in the said goods does not remain with the respondent but the same was transferred to service recipient and while execution of the works contract service the property in the said goods was with the recipient. Since the transfer of property in the said goods is not taking place during the execution of the Works Contract Service the value thereof cannot be included in the Works Contract Service. At the same time the respondent have used certain accessories and parts for execution of Works Contract Service and value thereof was admittedly included for the reasons that the property in the said good was transferred only during execution of works contract service. Therefore, there is a clear distinction between goods property of which is transferred prior to execution of Works Contract Service and the property in the goods transferred during the execution of Works Contract Service. In view of the clear provision under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 as amended by Notification No. 23/2009-S.T., dated 7- 7-2009 the value of the goods, property of which belongs to service recipient before execution of Works Contract Service, shall not be included in the gross amount of Works Contract Service.
6.9 The revenue's contention is that appellant being common for supply of goods and provider of Works Contract Service cannot enter into separate contract and in such case the one composite contract is not divisible. On this issue much water was flown. In the various courts have given judgments on this issue some of the judgment cited :
• Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co., AIR 1966 SC 543 • Tata Cellular v. Union of India, (1994) 6 SCC 651. 6.10 From the above judgments it can be seen that reliance on the tender or invitation to bid to decide the nature of the contract or the right and obligation flowing under a contract entered pursuant thereto is wholly misplaced, which would be governed only by the contracts entered into two between the parties. In the present case even though there is single bid that contain the condition of separate contract for supply of goods and supply of service. The two separate contracts are correct and legal and the same cannot be clubbed and held that it is a composite contract. The bid/tender is only a offering to the prospective contracts however, the contract is an agreement between two parties and which is recognized as a legal document therefore, when two separate contract are entered into between two separate parties, revenue cannot insist that there should be one composite contract.
17 Service Tax Appeal No.70410 of 2019 Therefore, we are of the clear view that even though there is single bid/tender, the two separate contracts are legal and correct and no question can be raised. In the following judgments the issue in question was considered :
• State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. - (1958) 9 STC 353 = 2015 (330) E.L.T. 11 (S.C.) • Hindustan Aeronautics Ltd. v. State of Karnataka, (1984) 1 SCC 706 • Builders' Assn. of India v. Union of India, (1989) 2 SCC 645 • State of Karnataka v. Trans Global Power Limited -
(2015) 77 VST 509 • Reliance Infrastructure Ltd. v. Deputy Commissioner -
2015 VIL 60 CAL • Ishikawajma-Harima Heavy Industries Ltd. v. Director of Income-tax, (2007) 3 SCC 481 = 2007 (6) S.T.R. 3 (S.C.).
6.11 In the above judgments one common issue has been considered that there can be two separate contracts, that is one for sale and another for Works Contract Service as in the present case the value of goods sold, property of which in goods has already been passed on, cannot form part of the value of the second contract i.e. Works Contract. 6.12 The Contention of the revenue is that it is necessary to enter a single indivisible contract is contrary to the principle that there are more than one way for performing an act. It is for parties concerned to choose the method and manner. In this regard the Hon'ble Supreme Court in CIT v. Motors and General Stores (P) Ltd., (1967) AIR 1968 SC 200 reads as under :
'6. In a later case - Commissioners of Inland Revenue v. Wesleyan and General Assurance Society [30 TC II ] - Viscount Simon expressed the principle as follows :
".................
Secondly, a transaction which, on its true construction, is of a kind that would escape tax, is not taxable on the ground that the same result could be brought about by a transaction in another from which would attract tax.."' 6.13 From the above judgment it is clear that even if it is contented that due to two separate contracts there is a shortfall in payment of tax that itself cannot be a reason to reject the concept of two separate contract legally entered into between two parties. Therefore the revenue's contention related to this is also not sustainable."
4.7 In case of Srinivasa Transports [2014 (34) STR 765 (T-Bang)] Bangalore bench has held as follows:
18 Service Tax Appeal No.70410 of 2019 "7. As regards the demand of Rs. 1.05 crore (approx) under the category of cargo handling services, the contract entered into by the appellant with M/s. RINL is for handling and internal transportation of stores materials within the Visakhapatnam Steel Plant site. The scope of the work included handling and internal transportation of stores materials such as plant, machinery, equipments, etc. at the plant site including crushing of coke breeze meant for Visakhapatnam Steel Plant, job contract for miscellaneous works awarded from time to time, supply of LCVs and packing of materials for transportation. Thus, a number of services are required to be provided by the appellant. While handling of stores materials along with internal transportation might merit classification under cargo handling service in the light of the decision of Hon'ble High Court of Orissa in the case of Coal Carriers (supra), other activities such as crushing of coke breeze, job contracts for miscellaneous works awarded from time to time, etc. would not come under the purview of cargo handling service.
Similarly, supply of LCVs would also not come within the purview of cargo handling service. We have also pursued some of the invoices raised by the appellant on the service recipient which describes the activities as transportation and the payment is made to the appellant based on the quality of goods transported. Similarly, the appellant has provided labour for undertaking miscellaneous jobs and payment has been made to the appellant based on number of man-days involved. This service also would not come under the category of cargo handling service. Therefore, clubbing all the activities undertaken by the appellant under "Cargo Handling Service" and levying Service Tax under the said category cannot be sustained in law. The adjudicating authority has to examine the individual activities carried out by the appellant and then classify the same, considering the definitions provided in the law, which has not been done in the present case. Therefore, the matter has to go back to the adjudicating authority for fresh consideration. Accordingly, we set aside the impugned order and remand the case back to the adjudicating authority for fresh consideration whether all the activities undertaken by the appellant for M/s. RINL would come within the purview of "Cargo Handling Service" or only a part of the activity would be covered within the definition of "Cargo Handling Service". The appellant is also directed to produce documentary evidences in support of their claim that some of the activities undertaken by them would not come under the purview of "Cargo Handling Service"."
4.8 We find that the ratio laid down in the above cases is squarely applicable to the facts of the present case. In view of 19 Service Tax Appeal No.70410 of 2019 the discussions above, the impugned order cannot be sustained and the same is set aside.
5.1 Appeal filed by the Appellant is allowed with consequential relief, as per law.
(Pronounced in open court on 24.04.2024) (P. K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Nihal