Custom, Excise & Service Tax Tribunal
Service Tax-I, Kolkata vs P.D.Prasad & Sons Pvt. Ltd. on 16 April, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 76131 of 2016
(Arising out of Order-in-Original No. 47-48/COMMR/ST-I/KOL/2015-16 dated
29.02.2016 passed by the Principal Commissioner of Service Tax-I, Kendriya Utpad
Shulk Bhawan, 180, Shantipally, Rajdanga Main Road, Kolkata - 700 107)
Commissioner of Service Tax : Appellant
Service Tax-I Commissionerate
Kendriya Utpad Shulk Bhawan, 3rd Floor,
180, Shantipally, Rajdanga Main Road, Kolkata - 700 107
VERSUS
M/s. P.D. Prasad & Sons Private Limited : Respondent
2, Sagar Estate, N.C. Dutta Sarani (Clive Ghat Street),
2nd Floor, Unit No. 12, Kolkata - 700 001
APPEARANCE:
Shri P.K. Ghosh, Authorized Representative, for the Appellant (Revenue)
Shri Indranil Banerjee, Advocate, for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 75898 / 2025
DATE OF HEARING: 20.03.2025
DATE OF DECISION: 16.04.2025
ORDER:[PER SHRI K. ANPAZHAKAN] The present appeal has been filed by the Revenue against the Order-in-Original No. 47- 48/COMMR/ST-I/KOL/2015-16 dated 29.02.2016 wherein the Ld. Principal Commissioner of Service Tax-I, Kolkata has dropped the demands of Service Tax, including cesses, amounting to Rs. 3,67,12,660/- for the period from October 2008 to March 2013 and Rs.1,87,09,402/- for the period from April 2013 to September 2014.
Page 2 of 19Appeal No.: ST/76131/2016-DB
2. The facts of the case are that M/s. P.D. Prasad& Sons Private Limited, Kolkata (hereinafter referred to as the Respondent) is registered for providing Custom House Agent service and Transportation of Goods by Road (GTA) service. Scrutiny of the books of account of the respondent revealed that the respondent were paying Service Tax after availing 75% abatement on the gross billed amount in respect of Custom House Agent service.
3. The Department took the view that the respondent was not eligible for the abatement as they were basically providing GTA service and not working as a 'pure agent' of the recipient of service in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006.
4. Accordingly, two Show Cause Notices were issued, first demanding Service Tax to the tune of Rs.3,67,31,969/- (including cess) for the period from October 2008 to March 2013 and the second demanding Service Tax to the tune of Rs.1,87,09,402/-(including cess) for the period from April 2013 to September 2014.
5. On adjudication, the Ld. Commissioner vide the impugned order, confirmed the demand of Service Tax of Rs.19,309/-, being the Service Tax short paid by the respondent under CHA service for the Financial Year 2012-13; as the said amount had already been paid by the respondent, the same was appropriated in the impugned order. The ld. adjudicating authority, however, has dropped the demand of Rs.3,67,12,660/- and Rs.1,87,09,402/- demanded in the Show Cause Notices.
Page 3 of 19Appeal No.: ST/76131/2016-DB 5.1. Aggrieved by the dropping of the demands, the Revenue has filed the instant appeal.
6. In their grounds-of-appeal, the Revenue has inter alia urged the following grounds, in terms of the observations made by the Committee of Chief Commissioners in the Review Order: -
(i) The principal activity of the Respondent is providing Customs House Agent's Service' as defined under Section 65(35) and Section 65(105)(h) of Finance Act, 1994.
(ii) In terms of Section 65(105)(h) of Finance Act, 1994, taxable service means service provided or to be provided to any person by a custom house agent in relation to the entry or departure of conveyances or the import or export of goods.
(iii) The service provided by a CHA, in relation to entry or departure of conveyances basically consists loading of import cargo at the port / land customs station and delivery of the same at the premises of the importer, loading of export cargo at the premises of the exporter and the delivery of the same at the customs port or land customs station.
(iv) The responsibility and scope of work of a CHA has been clearly brought out in the Show Cause Notice. It can also be inferred from the scope of work of a CHA that transportation of export goods from an exporter's premises to a customs station or import goods from customs station to importer's premises is a part and parcel of CHA activity. The definition of taxable service under CHA, as given under Section 65(105)(h) of Finance Act, 1994 also Page 4 of 19 Appeal No.: ST/76131/2016-DB incorporates entry or departure of conveyances or the import or export of goods which means that transportation of export or import cargo from an exporter's premises to customs station or from customs station to importer's premises is well within the ambit of CHA service and any abatement admissible under GTA service cannot be extended for performing a part of such GTA service.
6.1. Accordingly, the Revenue has prayed for setting aside the impugned order as regards dropping of the demands of Service Tax.
7. The Ld. Counsel appearing on behalf of the respondent submits that the respondents were registered for provision of CHA service and have also been paying Service Tax regularly. It is submitted that the contracts entered into by the respondent with their clients were primarily of three types, viz: -
(i) Contract for Custom House Agent and GTA as composite services
(ii) Contract for Custom House Agent Services only
(iii) Contract for GTA Services only, which forms subject matter of the Departmental Appeal 7.1. It is the submission of the respondent that they have discharged applicable Service Tax as regards Custom House Agent service and its composite contracts; there is no dispute on payment of Service Tax in this regard. For providing GTA services exclusively, the respondent submits that they used to discharge Service Tax on forwarding charge after availing 75% abatement in terms of Notification Page 5 of 19 Appeal No.: ST/76131/2016-DB No.26/2012-S.T. dated 20.06.2012, read with its predecessor notifications. In this regard, it is stated that liability to Service Tax on GTA services was primarily under reverse charge in accordance with Notification No. 30/2012-S.T. dated 20.06.2012; they have taken separate registration vis-à-vis Custom House Agent service and Goods Transport Agency service and filed separate S.T.-3 Returns for the said services.
7.2. The Respondent states that on 12.02.2004, an audit objection was raised wherein it was alleged that the abatement availed by them in respect of Goods Transport Agency service is not available to them inasmuch as they had received inward services from GTAs on behalf of their customers and had realized extra amounts over the charges raised by such GTAs against their output service; it was further alleged that the service in question were CHA service which includes transportation activities and accordingly, it was alleged that the respondent was not eligible for exclusion of the value of expenditure incurred for transportation from the gross billed amount in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. The respondent submits that the Show Cause Notices dated 21.04.2014 and 21.04.2015 were issued on the basis of the above allegations and demanded Service Tax of Rs.3,67,12,660/- and Rs.1,87,09,402/- for the periods from October 2008 to March 2013 and April 2013 to September 2014 respectively.
7.2. The respondent has also made the following submissions in support of their contentions: -
Page 6 of 19Appeal No.: ST/76131/2016-DB
(i) The Principal Commissioner, Service Tax-I Commissionerate dropped the impugned demands by recording cogent findings and such findings deserve to be confirmed. At paragraph No. 7.3, page No. 23 of the impugned order the adjudicating authority recorded that the noticee-respondent had entered into separate contracts with its clients for providing CHA service and GTA service and that in defence, the noticee-respondent had furnished copies of the relevant contracts together with sample bills.
The Department has not found fault with the said documentary evidences, nor has the Department been able to controvert the findings that in respect of composite contracts, the respondent did not claim any abatement or exemption and where the contract was exclusively for providing CHA service, the due service tax had been paid.
(ii) The Principal Commissioner, Service Tax-I Commissionerate also held that the respondent had issued consignment note in conformity with Rule 4B of the Service Tax Rules, 1994 and was the actual GTA service provider, as was evident from submitted copies of consignment notes, lorry hire bills, certificate from the lorry suppliers and Chartered Accountant's certificate. Such findings are also in consonance with Circular No. 186/5/2015-S.T. dated 05.10.2015 which has clarified that GTA is an entity providing services in relation to transport of goods by road and issuing consignment note, by whatever name called. The appellant- revenue's allegation that the respondent merely Page 7 of 19 Appeal No.: ST/76131/2016-DB received GTA service as inward service lacks merit. In the result, there remains no justification for alleging that the respondent availed irregular abatement.
(iii) The form as well as the substance of the service in question is undeniably that of GTA. While arriving at the finding that GTA service and CHA service were provided separately, the adjudicating authority rightly placed reliance on the decisions of:
a) E. V. Mathani & Co. -vs- Commissioner of Central Excise, Cochin reported in 2003 (157) ELT 101(T)
b) Bhagyanagar Services -vs-
Commissioner of Central Excise, ST- Hyderabad, reported in 2006 (4) STR 22 (T) and
c) Commissioner -vs- United Shippers Limited reported in 2015 (39) STR J369 (SC).
(iv) The grounds for challenge to the adjudication order are completely misconceived and the Department failed to acknowledge that provision of GTA services was a principal and independent activity of the respondent, as evident from its Memorandum and Articles of Association. The respondent had also sought separate registration for providing the said services. The Appellant's submissions are contrary to the principles encapsulated in Sections 65A and 66F of the Act.
Page 8 of 19Appeal No.: ST/76131/2016-DB
(v)The provisions of Section 65(35) of the Act read with Section 65(105)(h) thereof ought to have been properly read, which the Department failed to do. The disputed services which are sought to be taxed under the category 'CHA service' did not relate to the entry or departure of conveyances or the import or export of goods and it cannot be said that GTA services were incidental to the main CHA service. The consignment note/challan No. 8690 relied upon as Annexure B to show cause notice dated 21.04.2014 and the Bill No. E0619A/13-14 dated 19.09.2013 relied upon as Annexure B to show cause notice dated 21.04.2015 do not support the revenue's stand. If the respondent's business model were to be appreciated properly it would have to be concluded that the disputed service were not associated with CHA service and that the respondent had correctly availed abatement vis-a-vis GTA service. The Department also erred by trying to invoke Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 in the present facts and circumstances.
(vi) When there are separate contracts in place for service to be provided as C & F agent and as a transporter, the transportation charges collected cannot be added under the category C & F services and the function of CHA relates to only the import and export of goods and it does not extend to other activities, as held in Bax Global India Ltd. v. Commissioner of Service Tax, Bangalore, reported in 2008 (9) STR 412 (T). In this behalf, reliance is also Page 9 of 19 Appeal No.: ST/76131/2016-DB placed on Regulation 2(c) of Customs Brokers Licensing Regulation, 2013 which defines customs broker as licensed person authorized to act as an agent on behalf of the importer or exporter for the purpose of transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any customs station. No element of warehousing of goods or receiving despatch orders from the principal or arranging despatch of goods as per the principal's instructions or services in connection with entry or departure of conveyance or import/export of goods was involved in the Respondent's services sought to be disputed.
(vii) In any event, the respondent which issued consignment notes in terms of Rule 4B of the Service Tax Rules, 1994 ought to be regarded as the GTA service provider. Any contrary view would be offensive to Section 65B(26) of the Act. From the sample bills for lorry higher charges raised by different suppliers, clearing transporters and commission agents and their specimen undertakings, it would be evident that none had issued any consignment note and that all the parties had regarded the instant respondent as the GTA provider. In this regard, the respondent relies on the decision of Narendra Road Lines Pvt. Ltd. v. Commr. of Cus., C.Ex. & CGST, Agra reported in 2022 (64) GSTL 354 (T).
Page 10 of 19Appeal No.: ST/76131/2016-DB
(viii) The services in question were different from the end-to-end services provided under composite contracts, is duly evidenced from the sample contracts entered into between the respondent and its service recipient. The manner of raising bills for different services provided and the computation of appropriate service tax liability which has already been discharged has been certified by the respondent's Chartered Accountant vide its certificate issued on 10.10.2014. In the instant case, the contracts for GTA service were distinct and income referable thereto could not have been clubbed with the income under separate contracts, as per the ratio laid down in Krati Enterprises v. Commr. of CX & ST, Lucknow, reported in 2024 (390) ELT 380 (T). Thus, there remains no basis for alleging that the transportation activities in question were inherently associated with CHA service.
(ix) The respondent cited the specimen declarations submitted by the service recipients confirming payment of service tax on reverse charge. Under Section 68(2) of the Act read with notification 30/2012-ST dated 20.06.2012 and predecessor notifications, specified persons paying freight were liable to pay service tax on GTA services received. In the instant case, the respondent-GTA was liable to tax only for providing services to non-specified persons, in which cases it duly charged and paid the applicable service tax. Further taxing the self- same services under CHA head would be Page 11 of 19 Appeal No.: ST/76131/2016-DB tantamount to double taxation and would be completely illegal and unjustified.
(x)Even assuming though denying that the impugned demand is to be confirmed, the respondent would be eligible for cum-tax benefit and the final amount demandable would have to be re-worked.
(xi) Even otherwise, the purported demands are barred by limitation. The show cause proceedings in the instant case had been issued pursuant to audit concluded on 12.02.2014. There is no evidence on record proving any mala fide act or omission on the respondent's part and, hence recourse to the extended period of limitation under the proviso to Section 73(1) of the Act was impermissible. The 1st show cause notice was issued on 21.04.2014 covering October, 2008 to March, 2013 whereas the demands raised in relation to October, 2008 to September, 2012 were fully barred. Similarly, the demands raised for the period April, 2013 to September, 2013 in the 2nd show cause notice issued on 21.04.2015 were also barred by limitation.
(xii) Without prejudice, the respondent states that the dispute in the present case relates to classification and involves bona fide difference of opinion between the Department and the respondent-assessee, for which no penalty is impossible. Even if the impugned adjudication order is reversed and the demands of service tax confirmed, there would be no justification Page 12 of 19 Appeal No.: ST/76131/2016-DB for confirming the imposition of penalty under Section 78 of the Act.
7.3. In view of the above submissions, the respondent prays for rejecting the Revenue's appeal.
8. Heard both sides and perused the appeal records.
9. We observe that the respondent had entered into three different types of contracts. In respect of the composite contracts entered for CHA service and GTA service together, the respondents have been paying Service Tax and there is no dispute on these contracts. Even in respect of contracts entered solely for CHA service, there is no dispute as regards payment of Service Tax. The issue in the present appeal is related to the contracts entered only for GTA services, where the respondents have availed 75% abatement in terms of Notification No.26/2012-S.T. dated 20.06.2012 and paid Service Tax on the balance 25% of the value. In these contracts the abatement availed by the respondent is being disputed by the Revenue.
9.1. The Revenue is of the view that the Custom House Agent service rendered by the respondent includes transportation activities and accordingly, the value of transportation service is includable in the taxable value of CHA service in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. Accordingly, the Revenue contends that the respondent is not eligible for the abatement of 75% as provided under Notification No. 26/2012 dated 20.06.2012.
Page 13 of 19Appeal No.: ST/76131/2016-DB 9.2. We observe that the respondent had separate contracts for CHA service. Wherever they had rendered transportation of goods in the capacity of a goods transport agency and paid Service Tax after availing the abatement of 75% of the value, which they are legally entitled. The Department has not brought in any evidence to substantiate their allegation that the GTA service rendered by the respondent is part of their CHA service. It is on record that the respondent has been separately registered for providing GTA service and they have been issuing 'consignment notes' in the capacity of a GTA. It is seen that the respondent has been raising separate bills and paying Service Tax under the head of 'GTA service' after availment of 75% abatement. For the sake of ready reference, sample copies of such bills raised by the respondent and the consignment note issued by them in respect of Goods Transport Agency services rendered by them are extracted below: -
Page 14 of 19Appeal No.: ST/76131/2016-DB
10. Thus, we find that there is no truth in the allegation of the Department that the respondent had raised a single bill for transportation charges and Custom House Agent charges. In the instant case, we observe that the respondent who issued consignment notes in terms of Rule 4B of the Service Tax Rules, 1994 ought to be regarded as the GTA service provider and accordingly, they are entitled to avail the 75% abatement in terms of Notification No.26/2012- S.T. dated 20.06.2012.
Page 15 of 19Appeal No.: ST/76131/2016-DB
11. We further take note of the fact that in respect of GTA service, the liability is on the recipient of service under reverse charge mechanism and wherever the respondent had rendered the service in the capacity of a goods transport agency, they have paid Service Tax after availing abatement. The respondent cited the specimen declarations submitted by the service recipients confirming payment of service tax on reverse charge. We observe that under Section 68(2) of the Act read with Notification 30/2012-ST dated 20.06.2012 , specified persons paying freight were liable to pay service tax on GTA services received. In the instant case, the respondent- GTA was liable to tax only for providing services to non-specified persons, in which cases it duly charged and paid the applicable service tax.
12. Further, we observe that the ld. adjudicating authority has given a categorical finding in the impugned order as to the eligibility of the respondent to avail 75% abatement on the transportation charges to pay service tax on the GTA service by the respondent. The relevant part of the impugned order is reproduced below: -
"7.3 I find the noticee completely denied the allegation and stated that they took Service Tax Registration for taxable activity of (i) Customs House Agent Service and (ii) Transportation of Goods by Road Service. For providing such services, the noticee entered into separate written contracts with their clients and raised separate bills. In support they have submitted copies of the contracts for GTA service, for CHA service alongwith sample copies of bill for provision of GTA service and sample copies of bill for provision of CHA service.Page 16 of 19
Appeal No.: ST/76131/2016-DB On perusal of the said contracts alongwith copies of bill as submitted by the noticee, I find that where contracts are only for transportation of goods, they raise bill for transportation charges and pay Service Tax after availing 75% abatement on transport charges. In respect of composite contracts i.e. where they undertook transportation of goods by road alongwith activity of CHA under a single contract, they performed the transportations activity by hiring goods vehicles, issued consignment notes and raised single bill for transportation charges as well as for CHA charges and pay Service Tax without availing any abatement or exemption applicable for GTA service. And where the contract is for CHA Service, they pay Service Tax under CHA on the consideration received for undertaking such activity.
They undertook such transportation activity by hiring the goods carriage from different persons. For which, they had issued road challan / consignment notes in conformity of Rule 4B of the Rules. Thereby, they acted as provider of GTA service themselves. For hiring such lorry / goods carriage from different persons acting as supplier of lorry, to carry out such transport activity, such persons issue bills for lorry hire charge. In support of their claim they have submitted copies of consignment notes, lorry hired bill and certificate of the suppliers of lorry.
They further stated that where they provided GTA service and CHA service under same contract, they paid Service Tax on the 100% value of taxable service without taking any 75% abatement applicable for GTA service. In support of their claim they submitted Chartered Accountant certificate, which is acceptable as per the Apex Court judgment in catena of cases.Page 17 of 19
Appeal No.: ST/76131/2016-DB Therefore, the noticee contended that the allegation made in the Show Cause Notice arbitrarily by not recognized transportation is one of their business activities and failed to recognize contract for transportation they entered upon with their client.
In support of their claim the noticee relied on following judgments wherein in similar issue Hon'ble Tribunal held that transportation charges shall not be clubbed with the taxable value of another service provided: -
(i) E.V. Mathai and Co. versus Commissioner of Central Excise, Cochin [2003(157)ELT101 (Tri.-
Bang.)];
(ii) Bhagyanagar Services versus Commissioner of Central Excise, ST-Hyderabad [2006(4)STR22(Tri. Bang.)].
7.4 I observe from the submitted documents of the noticee that they are registered with the Department for activity of (i) Customs House Agent service and
(ii) Transportation of Goods by Road Service. I further observe that the noticee provided GTA service by hiring of lorry as they issue consignment note. As per Rule 48 of the Rules, I find any goods transport agency which provides service in relation to transport of goods by road in a goods carriage shall issue a consignment note to the recipient of service. In this juncture I like to mention that both the Show Cause Notices failed to adduce any evidence that the consignment note being issued by any third party service provider while alleging that GTA service was actually provided by the third party while the noticee mere produced the same.
Therefore, even I accept the allegation made in the Show Cause Notices that GTA service is provided by the third party, then also I cannot accept the Page 18 of 19 Appeal No.: ST/76131/2016-DB proposal of the Show Cause Notices that the value of GTA service should be added with CHA service while arriving the taxable value as the GTA service and CHA service were provided under separate contracts.
I find that the noticee has rightly referred the case of E.V. Mathai and Co. versus Commissioner of Central Excise, Cochin [2003 (157)ELT101(Tri.- Bang.)] and Bhagyanagar Services versus Commissioner of Central Excise, ST-Hyderabad [2006(4)STR22(Tri. Bang.)). I find in the point 4 of the order in the case of E.V. Mathai and Co. versus Commissioner of Central Excise, Cochin, wherein Hon'ble Tribunal held that-
"I have carefully considered the submission made by both sides. On going through the reason given by the Commissioner (Appeals) in the subsequent order with reference to the same facts and circumstances I do not find any justification for levy of service tax on transportation charges........
I further observe that in the case of Commissioner versus United Shippers Ltd.[2015(39)STR J369(S.C.)] wherein Hon'ble Supreme Court held that transportation charges shall not be included in the value of taxable services in respect of cargo handling service as contracts entered into with the customers show separately the charges towards shipping charges of cargo. I also find similar view assumed by Hon'ble Supreme Court in the case of Commissioner versus Jain Carrying Corporation [2015 (39) STR J370(S.C.)].
On the basis of above judgments and the documents submitted by the noticee I hold that the GTA service and CHA service was provided by the noticee Page 19 of 19 Appeal No.: ST/76131/2016-DB separately. Therefore, the question of addition of the value of GTA service in the value of CHA service under Rule 5 of Service Tax (Determination of Value) Rules 2006 as procurer of service GTA does not arise. Here, the noticee itself provided the service of GTA
(i) as the noticee themselves issues consignment notes, and
(ii) as they entered into separate contracts for provision of GTA service and raised separate bills for GTA services."
12.1. From the findings reproduced above, we observe that the ld. adjudicating authority has given a categorical finding after examining all the contracts and records available before him. Thus, we do not find any reason to disagree with the above findings of the ld. adjudicating authority.
13. In view of the above discussions, we do not find any infirmity in the impugned order dropping the demand of service tax raised in the notice. Thus, we uphold the impugned order dropping the demands of Service Tax under GTA service.
14. Accordingly, we uphold the impugned order and reject the appeal filed by the Revenue.
(Order pronounced in the open court on 16.04.2025) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd