Custom, Excise & Service Tax Tribunal
M/S Srivalli Shipping & Transport Pvt ... vs Commissioner Of Central Excise, ... on 24 October, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH REGIONAL BENCH AT HYDERABAD BENCH - DB COURT - I Appeal(s) Involved: ST/22203/2014-DB; ST/30416/2016; ST/30417/2016; ST/30715/2017 (Arising out of Order-in-Original No OIO No. VIZ-STX-001-COM-021-14 dt. 24.02.2014 passed by Commissioner of Central Excise, Customs & Service Tax Visakhapatnam) (Arising out of Order-in-Original No OIO No. OIA No. VIZ-EXCUS-002-APP-065-15-16 dt. 21.12.2015 passed by Commissioner of Central Excise, Customs & Service Tax (Appeals) Visakhapatnam) (Arising out of Order-in-Original No OIO No. VSP-EXCUS-001-COM-024-15-16 dt. 15.10.2015 passed by Commissioner of Central Excise & Customs, Visakhapatnam) (Arising out of Order-in-Original No. OIO No. VSP-EXCUS-001-COM-032-16-17 dt. 23.02.2017 passed by Commissioner of Central Excise Customs & Service Tax Visakhapatnam) M/s Srivalli Shipping & Transport Pvt Ltd Appellant(s) Versus Commissioner of Central Excise, VISAKHAPATNAM Respondent(s) Appearance: Mr.M.S. Nagaraja, Adv for the Appellant. Mr. Srinivasa Rao, A.R. for the Respondent. CORAM: HON'BLE Mr. M.V.RAVINDRAN, MEMBER (JUDICIAL) HON'BLE Mr. MADHU MOHAN DAMODHAR, MEMBER (TECHNICAL) Date of Hearing: 07/09/2017 Date of Decision: Final Order No. A/ / 2017 [Order per: M.V.RAVINDRAN] .
All these appeals are directed against orders-in-original No. VIZ-STX-001-COM-021-14 dated 24.02.2014.
2. Since the issue involved in all these Appeals being the same, they are disposed of by a common order.
3. The relevant facts that arise for consideration are the appellant herein during the period in question i.e. 2007-08 to 2014-15 is alleged to have not discharged the service tax liability under the category of goods transport agency services in relation to providing cargo handling services to their client. It is alleged in the show-cause notice that the appellant herein had engaged vehicles/trucks from various transport organisations and were sent to their customers for transportation of goods. Appellant paid the transport cost but hired them the vehicles/lorries. It is the case of the Revenue that appellant being The person who had paid the transporters for the vehicles given to them, is required to discharge the service tax liability as per Rule 2(1)(d) of the Service Tax Rules 1994 (herein after referred to as Rules) on the interpretation that appellant having paid the consideration to the transporters they become liable for service tax. It is the case of the appellant that they had only paid the hiring charges and subsequently charged the entire amount plus their commission to their clients who were provided with these vehicles. The adjudicating authority after following the due process of law was not convinced by the defence put up by the appellant and after following due process of law, rejected the contentions raised and confirmed the demands raised with interest and also imposed penalties. In one of the appeals, the 1st appellate Authority has confirmed the demand of Rs 7,38,509/- on the same ground and also imposed equivalent penalty. Learned counsel after giving the overall picture of the activities of the appellant submits that they themselves are transporters and do not avail services of any other transporters and as and when they fall short of their own vehicles, they engaged vehicles from other transporters and billed their clients an amount which includes charges from the other transporters as well as their commission. After collecting the amounts from their clients they pay the charges to the transporters from whom the vehicles were engaged and service tax of entire freight charges for the amounts billed by appellants is discharged by their clients under reverse charge mechanism as a recipient of GTA services, in support of which he produces documents like the bills raised by them in their appeal memoranda. He would also submit that similar issue came up before the Bench in the case of Essar Logistics Ltd., Vs CCE Surat [2014(33)STR 588(T-Ahmd)] and in the case of MSPL Ltd Vs CCE Belgaum [2009(13) STR 554 (Tri-Bang)] wherein it was held that liability to pay service tax is cast upon the person who is paying the freight as per the provisions.
4. Learned A.R. on the other hand submits that the appellant has engaged the services of transporters but rented them the vehicles which are utilised by appellant for transportation of the goods of their clients. He would submit that appellants having paid such transporters for engaging the vehicles is the person who has paid the freight for transportation of goods, hence is liable to discharge the service tax liability. He would rely upon the decision of the Tribunal in the case of Darbar Transport Co Vs CCE, Jaipur [2016(41) STR 320 (Tri-Del)] wherein it was held that hirer of the vehicle from other transporters is liable to be taxed in the hands of the person who hired the said vehicles. Same is the view, according to him expressed by the Tribunal in the case of Rajalakshmi Paper Mills Pvt Ltd Vs CCE Madurai [2011 (22)STR 635 (Tri-Chennai).
5. We have considered the submissions made by at length by both sides and perused the records.
6. Undisputed facts are appellant is transporter themselves and raises bills on their clients for transportation of the goods and freight charges paid by the clients which accounted in their client records and their clients discharge the service tax liability as consignor or consignee as the case may be. Appellant engaged various vehicles whenever there is shortage of their own vehicles and engaged such vehicles for transportation of the goods of their clients; charges paid by the appellant to such transporters are charged to their clients along with additional amount which is as per the contract with their clients; after receiving the amounts from their clients, appellants settled the bills of the transporters form whom he had engaged the vehicles. It is also undisputed that on these transactions, the appellants clients discharged the service tax liability as consignor or as a consignee., On this factual matrix, we have to come to a conclusion whether appellant is required to discharge the service tax liability under the category of goods transport agency or otherwise.
7. The definition of a person liable to discharge service tax liability under goods transport agency is under reverse charge mechanism and has been ensigned under Section 65(50)(b) of the Finance Act 1994 read with the said Rules. In order to appreciate the correct position of the person liable for paying the service tax under goods transport agency it is pertinent to reproduce the said rules.
Rule 2(1)(d)(v) of Service Tax Rules 1994 defines person liable for paying the service tax as under para (v):-
(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 established by or 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;
8. The plain reading of the above reproduced Rules would indicate that service tax liability on goods transport agency services is under reverse charge mechanism more so if the consignor or consignee falls in one of the category as indicated hereinabove or a person who is liable to pay freight charges. It is on record that appellant herein does not discharge the freight charges but claims the amount from their client who pays it to the transporters from whom they engaged the vehicles. In our view, the demands raised by the lower authorities and confirmed cannot be upheld as identical issue came up before the Tribunal in the case of Essar Logistics Ltd Vs CCE Surat [2014(33)STR 588(T-Ahm)] wherein in paragraph- 9, the Bench laid down the ratio.
9.?It has also to be seen that under Rule 2(1)(d)(v) of Service Tax Rules, 1994 as reproduced hereinabove defines person liable for paying the Service Tax under the provision of Section 68(2) of the Finance Act, 1994. It would mean that the entities as indicated under the said Rule 2(1)(d)(v) are consignor or consignee, are liable to pay the freight and hence are liable to discharge the service tax liability. In the case in hand before us it is undisputed that EOL is a refinery and a factory and company established and covered under the Factories Act as well as Companies Act. We find that the adjudicating authority has relied upon the C.B.E. & C. Circular dated 17-12-2004 to confirm the demand of Service Tax on the appellant with reference to paragraph No. 4.5, in our considered view, as already reproduced hereinabove the statutory provision do not indicate that GTA service provider is liable to pay the Service Tax if the consignor or consignee is covered under the entities as indicated under said Rule 2(1)(d)(v). In our view the clarification of the Board cannot go beyond the statutory provisions, which clearly mandate that Service Tax liability has to be discharged either by consignor or consignee, if he falls under the specified category.
9. Similar views have been expressed by the Tribunal in the case of MSPL Ltd wherein the Bench in paragraph-9 has held as under:-
9.?On a very careful consideration of the entire issue, we find that the appellants transport the goods in their own vehicle to the buyer. The buyer is a person who actually pays the freight. It is very clear in terms of Rule 2(1)(d)(v) that the liability to pay service tax is cost (sic) (cast) on the person who pays the freight. In this case the person who pays the freight is the buyer. Therefore, the appellant has no liability to pay the service tax. In such circumstances, the action of the Commissioner (Appeals) in setting aside the original order is correct, but there is absolutely no need for remanding the matter. The appellant has no liability at all to pay the service tax. Hence, the appeal is allowed with consequential relief.
10. As against the two reproduced ratios of the decisions which are squarely on the point, A.R. relied upon the decision of the Tribunal in the case of Darbar Transport Co (supra). On careful reading of the said judgement, we notice that in that case, the said Darbar Transport Co., did not have his own trucks and for the purpose of transportation hires the same from various truck owners is a fact which is recorded in the 1st Paragraph which is different than the facts in these cases. As regards the reliance placed on the decision of Rajalakshmi Paper Mills Pvt Ltd Vs CCE Madurai [2011(22)STR 635 (Tri-Che)], it is noticed that the said decision is rendered by a Single Member Bench and the decisions of Essar Logistics and MSPL Ltd are rendered by a Division Bench. The ratio of the Division bench has to be followed is the convention and we do so.
11. In view of the foregoing, in the facts and circumstances of this case, we hold that the impugned orders are unsustainable and liable to be set aside and we do so. The impugned orders are set aside and the appeals are allowed.
(Order pronounced in open court on )
MADHU MOHAN DAMODHAR
MEMBER (TECHNICAL)
M.V.RAVINDRAN
MEMBER (JUDICIAL)
Neela Reddy
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