Custom, Excise & Service Tax Tribunal
Rajalakshmi Paper Mills Pvt. Ltd vs Cce, Madurai on 11 March, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH, CHENNAI ST/S/162/2010 & ST/284/2010 (Arising out of Order in Appeal No. 47/2010 dated 25.02.2010 passed by the Commissioner of Central Excise (Appeals), Madurai). ST/S/465-466/2010 & ST/785-786/2010 (Arising out of Order in Appeal No. 427-429/10 dated 28.09.2010 passed by the Commissioner of Central Excise (Appeals), Madurai). ST/S/467-468/2010 & ST/787-788/2010 (Arising out of Order in Appeal No. 440-441/10 dated 28.09.2010 passed by the Commissioner of Central Excise (Appeals), Madurai). For approval and signature Honble Dr. CHITTARANJAN SATAPATHY, Technical Member 1. Rajalakshmi Paper Mills Pvt. Ltd. : Appellants 2. V.G Paper & Boards Ltd. 3. Vishnuvardhan Paper Mills Pvt. Ltd. Vs. CCE, Madurai : Respondents
Appearance Smt. Sridevi, Adv., for the appellants Shri A.B. Niranjan Babu, SDR, for the respondents CORAM Dr. CHITTARANJAN SATAPATHY, Technical Member Date of hearing : 11.03.2011 Date of decision : 11.03.2011 ORDER No.___________________ Heard both sides.
2. I find that in a similar case, the Division Bench has waived the requirement of predeposit vide M/s. Amaravathi Sri Venkatesa Paper Mills Pvt. Ltd. Vs. CCE, Madurai, Stay Order No.166-171/11 dated 31.01.11. As such the requirement of predeposit in respect of these five appeals is waived.
3. As these all appeals revolve around a short point, these are taken up for hearing and disposal today itself. Smt. Sridevi, the Ld. Advocate, appearing for the appellants states that the appellants are paper mills who are dispatching paper and paper boards manufactured by them through their consignment agents. The freight is not paid by the appellants and the invoices are marked with To Pay, clearly indicating that the freight is to be paid by the consignment agents. She further states that the consignment agents are paying the freight to the transporters and deducting the freight from the total amount received from the ultimate buyers. In this connection, she also submits a certificate from a Chartered Accountant dated 14.05.2010 certifying to the effect that the appellants have not paid the freight amount and that the same have been paid by the consignment agents. She, however, states that the consignment agents have discharged their service tax liability on such freight amounts paid by them and in this connection she submits two sample letters from M/s.Kasturchand Otarmal & Co. and M/s.Papsel, bearing dates 30.08.10 and 28.08.10 respectively, wherein it has been stated that the service tax liability has been discharged by these consignment agents. As such, she prays that the service tax liability on the freight amount, which is not paid by the appellants cannot be fastened unto them.
4. Shri A.B. Niranjan Babu, the Ld. SDR appearing for the department states that the consignment agents are acting only as agents for the appellants paper mills. Hence, the appellants are liable to pay service tax. He also refers to the legal provision under Rule 2 (1)(d)(v) of the Service Tax Rules,1994, under which any person who pays or is liable to pay freight either himself or through his agent is liable to pay the service tax. According to him, even if the consignment agents have paid the freight amount, the appellants paper mills cannot escape from the tax liability.
5. I have considered the submissions from both sides. The facts of the case are that the appellants have not paid the freight amount to the transporters which is not in dispute. The impugned order itself records that the freight has been paid by the consignment agents. It has also been recorded in the impugned order that the freight has been recovered by the consignment agents from the amount received by them from the ultimate buyers. Rule 2(1)(d)(v) of the Service Tax Rules, 1994 reads as under:-
Person liable for paying service tax means :-
(v) in relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is,-
(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948)
(b) any company [formed or registered under] the Companies Act, 1956;
(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 Central Excise Act, 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. In this case, the appellants are companies registered under the Companies Act and the consignment agents are partnership firms/companies, according to the Ld. Advocate. As such, both the appellants and the consignment agents fall under the category person who are liable to pay service tax. It is also not in doubt that the consignment agents are agents of the appellants engaged in the business of selling paper and paper boards on behalf of the appellants. However, it is not established that the consignment agents have paid the freight amounts on behalf of the appellants. If that were so, then the consignment agents would be recovering the freight amounts from the appellants which is not the case. On the other hand, the findings of the authorities below are that the freight amounts are paid by the consignment agents and are deducted from the sale proceeds received from the ultimate buyers of the paper and paper boards. This position is also borne out from the Chartered Accountants certificates submitted by the Ld. Advocate. Accordingly, it is not possible to hold that the appellants are paying the freight through their agents and are therefore liable to pay service tax. On the other hand, the consignment agents squarely fall under the category of persons who are liable to pay service tax since they have paid the freight amount themselves. In this regard, it has also been submitted by the Ld. Advocate that some of the consignment agents have certified that they have indeed paid the service tax. It is of course subject to verification by the department and such of those consignment agents, who have not paid the service tax would no doubt be liable to be proceeded against by the department, for cases of non-payment, if any. In view of the foregoing, I am of the view that the demands raised against the appellants cannot be sustained. The impugned orders are set aside and all the five appeals are allowed.
(Order dictated and pronounced in the open Court) (Dr. CHITTARANJAN SATAPATHY) TECHNICAL MEMBER BB 6