Custom, Excise & Service Tax Tribunal
Bothra Shipping Services vs Visakhapatnam-I on 11 September, 2025
(1)
ST/26110/2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench - Court No. - I
Service Tax Appeal No. 26110 of 2013
(Arising out of Order-in-Original No.VIZ-STX-001-COM-127-12 dt.30.11.2012 passed by
Commissioner of Customs, Central Excise & Service Tax, Visakhapatnam-I)
M/s Bothra Shipping Services
D.No.28-2-47, First Floor, Daspalla Centre, ......Appellant
Suryabagh, Visakhapatnam, AP - 530 020
VERSUS
Commissioner of Central Excise &
Service Tax, Visakhapatnam
Port Area, Visakhapatnam,
......Respondent
Andhra Pradesh - 530 035 Appearance Shri Adithya, CA & Shri B. Adarsh, CMA for the Appellant. Shri V.R. Pavan Kumar, AR for the Respondent.
Coram: HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE MR. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30362/2025 Date of Hearing: 14.05.2025 Date of Decision: 11.09.2025 [Order per: A.K. JYOTISHI] M/s Bothra Shipping Services (hereinafter referred to as appellant) are in appeal against the Order-in-Original dt.30.11.2012, whereby, a demand of Rs.11,33,65,894/- for the period 2006-07 to 2010-11 has been confirmed under Reverse Charge Mechanism (RCM) in terms of Rule 2(1)(d)(v) of Service Tax Rules, 1994 (Rules) by the adjudicating authority (Impugned Order).
2. The brief facts of the case are that the department, based on various documents, financial records, etc., came to the conclusion that the appellant had incurred certain expenditure on account of transportation of goods but have not paid service tax under the category of 'Transportation of Goods by (2) ST/26110/2013 Road service' (GTA) under section 65(105)(zzp) of Finance Act, 1994, in terms of said Rules. Further, since they had not provided any documentary proof from transporter, other than one M/s Shree Tirupati Transport, as required for the purpose of allowing abatement under Notification No.32/2004-ST dt.03.12.2004 and Notification No.01/2006 for the period prior to 01.03.2008, they would not be entitled for any abatement for the purpose of calculation of service tax liability also. Moreover, extended period has been invoked as they had neither taken registration under 'transportation of goods by road service' nor had shown/ included the value of taxable services in the ST3 returns with an intention to evade payment of tax.
3. On adjudication, the adjudicating authority has gone through various submissions made by the appellant including their submission that even if the services received from said transporter are GTA service, the service tax cannot be levied on them as the mine owners have already paid service tax on total freight on the same consignment and certificates to that effect have been issued by the said mine owners evidencing the discharge of service tax under RCM, which has already been submitted. Further, under GTA service, the liability to pay service tax is cast on either consignor or consignee and only when they are not specified then only the GTA is liable to pay tax and since the appellants are neither consignor nor consignee and are merely acting as agent of mine owners and arranging transportation, therefore, they are not liable to pay service tax under Rule 2(1)(d)(v) of Service Tax Rules. They also claimed that notwithstanding their challenge to the demand on merit itself, they are otherwise also eligible for abatement in terms of Notification No.32/2004 as it was merely a procedural breach and also the fact that for subsequent period such conditions itself were withdrawn by the Government. He relies on various judgments in this regard.
4. The adjudicating authority has mainly considered the fact that the appellants are a partnership firm and are in the business of providing cargo handling service, Customs House Agency service, etc., to the mines owners and they have incurred expenditure on account of transportation. Further, as per the details available in their financial record, they have clearly incurred the freight in respect of certain transportation done by independent transporters, whose services were utilized by them for providing (3) ST/26110/2013 transportation services to their customers i.e., mine owners. He has, inter alia, noted that appellants were using their own vehicles for provision of service and only when they were not able to meet the requirements, they were obtaining vehicles from outside truck operators/ transporters and therefore, they were acting in two capacities; one, as transporter, when they are using their own vehicles and two, as person arranging transportation. Therefore, in the first case, the appellants being actual transporters would be issuing consignment note and they would have to be treated as service provider and client who has paid the freight would be liable to pay the service tax. However, in the second case, he noted that it is not known whether consignment note has been issued by the assessee or not. He has also noted that this issue was not clarified by the appellant and the fact that nature of contract between the appellant and their client was also not elaborated by the appellant except for submitting that they undertook transportation for their client using hired trucks.
5. Insofar as the issue of abatement is concerned, he has gone by the conditions under Notification No.32/2004-ST, which, inter alia, provided that if the goods transport agency has availed the benefit of cenvat and/or the benefit of notification 12/2003-ST, the exemption envisaged in this notification would not apply. Therefore, on strict construction, these conditions are required to be met and it is not a simple procedural compliance and held that these conditions have not been met despite producing three letters by one M/s Shree Tirupati Transport stating that they had not availed any Cenvat credit for providing GTA service during the period 2005-06. He considered that this condition of the notification has been satisfied but it does not speak about the availment of benefit of Notification No.12/2003-ST and they have also not produced any evidence in respect of remaining transporters from whom they received the impugned service. He also upheld the invocation of extended period.
6. On appeal, the main grounds taken by the appellant are, inter alia, as under:
a) Services provided by the truck owners are not GTA service in terms of section 65(50b) of Finance Act, 1994 (Act).
b) Appellants are not liable to pay freight and hence, not liable to pay service tax under RCM.(4)
ST/26110/2013
c) Appellants are neither consignor nor consignee of said goods and therefore, Rule 2(1)(d)(v) will not apply.
d) The expenditure reflected in their books of account is in respect of services received from truck operators and not GTA.
e) Service Tax has already been paid by the consignee, who is the person liable to pay freight.
f) Alternatively, Appellants are entitled to claim the benefit of Notification No.32/2004 dt.03.12.2004.
g) The extended period of limitation under proviso to section 73(1) cannot be invoked in the facts of the case and penalty under section 76 and 78 cannot be invoked in the facts of the case.
7. Learned Advocate has mainly contested that they were utilizing third party service providers, who were providing their trucks for transportation of goods and those truck operators/owners cannot be called as Goods Transport Agents in terms of definition of GTA service, since they did not issue any consignment note and that the department has not brought any evidence to establish that third party service providers were issuing any consignment notes when carrying the said goods and since the issue is no longer res integra that if consignment notes are not issued, then GTA services cannot be said to have been provided. Further, they merely have the responsibility for providing transportation and it is the customer, who is liable to pay the freight whether the goods are transported using their own vehicle or using vehicle of third party. As far as invocation of Rule 2(1)(d)(v) of Service Tax Rules, which provides that a person who pays the freight or is liable to pay the freight will be the person liable for paying service tax, since they are not liable to pay freight and it is the consignee of the goods i.e., appellant's customers, who are liable to pay freight and therefore, the customers are liable to pay service tax on RCM basis and in fact, they have paid also. Since they are neither consignor nor consignee qua such goods, hence, not covered under Rule 2(1)(d)(v) and service tax has already been paid by the consignee who is liable to pay freight.
8. Insofar as issue of computation of demand without allowing the abatement, he submits that appellant had produced requisite declarations in terms of Circular F.No.B1/6/2005-TRU dt.27.07.2005, which has been (5) ST/26110/2013 rejected on flimsy grounds by the adjudicating authority. However, this declaration is also not relevant in terms of various judgments as under:
a) CCE, Rajkot Vs Sunhill Ceramics Pvt Ltd [2008 (9) STR 530 (Tri- Ahmd)]
b) Indian Oil Corp Ltd Vs CCE, Patna [2013 (29) STR 524 (Tri-Kol)]
c) Lykes Line Ltd Vs CST, Mumbai-I [2017 (50) STR 51 (Tri-Mum)]
d) Prakash Industries Ltd Vs CCE, Raipur [2015 (40) STR 804 (Tri-Del)]
9. He also submits that penalty cannot be simultaneously invoked under section 76 & 78.
10. Learned AR, on the other hand, apart from reiterating the findings of the adjudicating authority, has also, inter alia, submitted that notification has to be construed strictly and that there is no requirement for issuance of consignment note for being considered as GTA relying on the judgment in the case of Coromandel Agro Products & Oils Ltd Vs CCE, Guntur [2014 (33) STR 660 (Tri-Bang)].
11. Heard both sides and perused the records.
12. The core issues, which are required to be examined, are as under:
a) Whether the Truck Operators/Transporters from whom the appellants were hiring trucks was in the nature of GTA and the services they provided to appellant were in the nature of GTA services or otherwise.
b) Whether appellants were required to pay service tax on GTA service by virtue of Rule 2(1)(d)(v) of Service Tax Rules, 1994 in view of their having incurred expenditure on account of transportation or otherwise.
c) If required to pay service tax, whether they are entitled for abatement in terms of Notification 32/2004 in view of certain certificates submitted by them or otherwise.
13. Insofar as far as first issue is concerned, it is an admitted fact that the appellants outsourced hired trucks for transporting ore to their customers and also incurred expenses towards freight. The allegation is that this expenditure is transport charges paid by appellant towards the service received by them from Goods Transport Agencies and since they have received GTA services under section 65(105)(zzp) read with section 65(50b) and they being partnership firm and recipient of service, hence, liable to pay (6) ST/26110/2013 service tax in terms of Rule 2(1)(d)(v) of Service Tax Rules, 1994. Before we proceed further, some of the relevant definitions and provisions need to be understood.
14. The Goods Transport Agency (GTA) has been defined under section 65(50b) as below:
"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.
15. Section 65(105) defines taxable services and section 66 is the charging section provides for levy of service tax in respect of taxable services referred to in clause (105) of section 65 of the Act. It also provides that the same will be collected in such manner as may be prescribed. Section 68(1) of the Act provides that person providing taxable service to any person will be liable to pay service tax, however, section 68(2) provides for exception to section68(1), where Government can specify any other person as liable to pay service tax. Further, Rule 2(d) provides for treating certain persons in respect of which service has been notified under sub- section (2) of section 68 as person liable to pay service tax. GTA service is notified under section 68(2). Similarly, as per Rule 2(1)(d)(v), certain provisions have been made to decide as to who shall be liable to pay service tax when he receives GTA service, irrespective to his being service recipient. The relevant Rule is cited below for ease of reference.
"Rule 2(1)(d) - "person liable for paying service tax" means -
(i) ...
(ii) ...
(iii) ...
(iv) ...
(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
b) any company formed or registered under Companies Act, 1956
c) any corporation established under any law
d) any society registered under the Societies Registration Act, 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 or the rules made thereunder; or
g) any body corporate established or a partnership firm registered by or under any law, (7) ST/26110/2013 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;
(vi) ...
(vii) ..."
16. Thus, if all these provisions are read harmoniously, it would be obvious that service tax can be levied in terms of section 66 only during the relevant period in respect of specified services including GTA service. Therefore, once a service is leviable to service tax then as to who will be liable to pay the same has to be decided in terms of section 68(1) or 68(2). It is also an admitted position that demand is being made in terms of Rule 68(2) read with Rule 2(d) of Service Tax Rules, 1994.
17. It is an admitted fact that the appellants were providing certain transport service directly to the mines owners for whom they were carrying out, inter alia, transportation of ores using their own trucks and were also collecting the freight charges. It is also an admitted fact that department has not produced any consignment note issued by the truck operators, whose trucks were used to transport the ore to the mines owners. In fact, Commissioner, while adjudicating the matter has observed that their being an actual transporter when using their own trucks and were in fact issuing consignment notes also, however, it was not known whether the transporters from whom the appellant had allegedly received GTA service had issued any consignment note, either to the appellant or to the ultimate customer i.e., Mines owners. The department has alleged that they have not paid service tax on GTA service in terms of said Rules, even though they have paid freight to the truck operators. We find that to fall under The GTA service, it would be a mandatory requirement that the person providing transport service has to issue a consignment note in terms of Rule 4B of Service Tax Rules, which in the present case is not available. Department has not adduced any evidence to the effect that said Truck operators/ transporters, who provided trucks on hire basis to the appellant had issued any Consignment Note in respect of iron ore carried by them to their customers i.e., mines owners. We note that department has mainly relied on the Rule 2(1)(d)(v) for levying and collecting service tax from appellant. The Adjudicating Authority has presumed that service being received by appellant was GTA service and therefore, relying on Rule 2(1)(d)(v), held (8) ST/26110/2013 that they are required to pay service tax. We feel that the Rules cannot become charging section for levy of service tax and it can only regulate the manner of collection once the taxable service itself is provided or leviable to service tax in terms of section 66 of the Act. Therefore, the first and foremost condition is that taxable service has to be provided by the provider of service i.e., transporter of goods, to the recipient of said service and only thereafter, by applying Rule 2(1)(d)(v), it has to be determined as to who shall be liable to pay the said service tax. In the present factual matrix, apart from appellant having not received the taxable service from the provider i.e., transporters/ truck operators inasmuch as there is no consignment note, he is also not even liable to pay freight and it is the mine owners, who were actually liable to pay freight and have either paid the freight or have reimbursed the same to the appellant. In any case, as a defence, appellant had submitted to department that the mine owners have paid the freight and have also paid applicable service tax as recipient. Therefore, even if it is presumed that they had paid the freight and therefore, liable to pay service tax, the appellant's contention that it was being paid by them on behalf of the customers and were getting the same reimbursed has also much force, especially when department has not adduced any evidence that they were not getting the freight ultimately paid or reimbursed by the mines owners. The department is not contesting that mines owners have not paid any service tax as recipient of ores. Therefore, on both the counts, namely appellant having not received taxable service at threshold and also that they were not liable to pay freight in the given factual matrix, demand of service tax on GTA service against the appellant will not survive.
18. The appellants have, inter alia, relied on various case laws in their support, as under:
18.1 In the case of South Eastern Coalfields Ltd Vs CCE, Raipur [2017 (47) STR 93 (Tri-Del)], where the factual matrix was more or less similar, the Tribunal examined the scope of the service under section 65(105)(zzp) and held that in the absence of issuance of consignment note, the tax liability under GTA service cannot sustain. Para 6 is cited below:
"6. The admitted facts are that the appellants engaged various transporters/contractors for moving coal from pithead to railway sidings. These contractors do not issue 'consignment note' to the appellant. The (9) ST/26110/2013 appellant had issued slips with a view to keep the track of the goods for onwards transportation. We have perused one such slip which is issued at the loading point. The serial numbered form contained certain details like weight, date, etc. The admitted fact is that the consignor and consignee are one and the same and transporter of goods is not issuing any consignment note. In such a situation, the original authority quoting "letter and spirit of the statute" observed that by not issuing consignment note the transporter had violated the provision of Rule 4B of the Service Tax Rules, 1994. We find that the reasoning followed by ld. Commissioner is devoid of merit. It is relevant to examine the concerned legal provisions:
Section 65(105)(zzp) of the Act defines the taxable service as under:
(zzp) to any person, by a goods transport agency, in relation to transport of goods by road in a goods carriage;
Section 65(50b) of the Act defines 'goods transport agency' as under:
(50b) "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;
It is clear that to be called "goods transport agency" a person should fulfill two conditions, namely, he should provide service in relation to transport of goods by road and issue consignment note, by whatever name called. In the present case, admittedly, no consignment note was issued by the goods transporter. The original authority held that the slip/challans issued for monitoring purposes by the appellant (receiver of service) will satisfy such conditions and tax liability can be upheld. We are unable to understand or appreciate such reasoning. The original authority is creating an amalgamation of service provider and recipient to fit in the definition of Goods Transport Agency. In other words, the transport of coal is done by the transport contractor which satisfied the first condition but no consignment note being issued. The slip issued by the appellant as recipient of service is taken with such activity of transport to bring in tax liability. We find that such attempt is beyond the scope of law and without merit."
18.2 In the case of CCE & C, Guntur Vs Kanaka Durga Agro Oil Products Pvt Ltd [2009 (15) STR 399 (Tri-Bang)], though service tax was paid under GTA service, the abatement was denied by the department. However, the Commissioner (Appeals) had overruled the view of the department against which appeal was filed. The plea of the appellant was that they had paid service tax wrongly because the service has been rendered by individual truck owners and not by the GTA. The decision was given in favour of the assessee and the department's appeal was rejected. Para 8 is cited below:
8. We have gone through the records of the case very carefully. The main contention of the appellant is that they had paid the service Tax wrongly because the services have been rendered by individual truck owners and not by goods transport agency. This point has been noticed by the Commissioner (A) also. Therefore, the Commissioner (A) has set aside the orders of the Original Authority demanding differential Service (10) ST/26110/2013 Tax. He has also noted the contention of the respondents that they are not liable to pay Service Tax. He has also stated that the transportation has been undertaken by individuals owning and operating the trucks and therefore, they are not registered with the department and the question of availing credit and other facilities do not arise and consequently, they need not follow the procedures prescribed by the Board. The learned departmental representative stated that the respondents themselves paid the Service Tax and the department only demanded the differential duty as they would not be entitled for the benefit of the Notification No. 32/2004-S.T. dt. 3-12-2004 by which the respondents paid only 25% of the amount. From the definition of the GTA and also the clarification given by the Finance Minister in the budget speech, we are of the view that the tax has been paid wrongly and the respondents are not liable to pay any Service Tax. In these circumstances, we uphold the impugned orders and reject revenue's appeals.
18.3 Reference was also made to the Finance Minister's speech in the context of levy of service tax on Goods Transport Operator. The relevant portion is cited below:
"149. 58 services have been brought under the net so far. I propose to add some more this year. These are business exhibition services; airport services; services provided by transport booking agents; transport of goods by air; survey and exploration services; opinion poll services; intellectual property services other than copy right; brokers of forward contracts; pandal and shamiana contractors; outdoor caterers; independent TV/radio programme producers; construction services in respect of commercial or industrial constructions; and life insurance services to the extent of the risk premium. I may clarify that there is no intention to levy service tax on truck owners or truck operators. Nor, as was clarified by my predecessor, is there any intention to levy service tax On the savings part of the premium collected by, an insurer."
18.4 In the case of Shanti Fortune (I) Pvt Ltd Vs CCE, Coimbatore [2010 (19) STR 883 (Tri-Chennai)], relying on the judgment of Kanaka Durga Agro Oil Products Pvt Ltd (supra), it was decided in favour of the appellant holding that there is no liability of recipient of service in case of transportation undertaken by individual truck operators and not by GTA.
18.5 Apart from the above, the appellant has also relied on the judgment in the case of Srivalli Shipping & Transport Pvt Ltd Vs CCE, Vizag [2018 (10) GSTL 450 (Tri-Hyd)], where the appellant had engaged vehicles/trucks from various transport organizations and were sent to their customers for transportation of goods and the appellant paid the charges of so hired vehicles/lorry and the department has demanded service tax as per Rule 2(1)(d) of Service Tax Rules, 1994 on the interpretation that appellant having paid consideration to the transporters became liable for service tax. After going through the provisions of Rule 2(1)(d) of Service Tax Rules and the judgment in the case of Essar Logistics Ltd [2014 (33) STR 588 (11) ST/26110/2013 (Tribunal)] and judgment in the case of MSPL Ltd [2009 (13) STR 554 (Tribunal)], coordinate bench allowed the appeal by setting aside the order where demand had been made under Rule 2(1)(d) of Service Tax Rules.
19. Therefore, we find that the issue is no longer res integra that when there is no issuance of consignment note, there cannot be a GTA service and therefore, no demand can be made from either consignor or consignee. However, if GTA service has been provided, then the liability to pay service tax by the recipient would be determined in accordance with provisions of Rule 2(1)(d) of Service Tax Rules.
20. We also find that the reliance has been placed by the Revenue on Coromandel Agro Products and Oil Limited Vs CCE, Guntur [2014 (33) STR 660 (Tri-Bang)] which was in the context of refund claim, the Single Member, inter alia, held that recipient is liable to pay service tax even when the provider has not issued consignment note in accordance with law and violated the provisions of law. We are, however, unable to concur with his view in the light of various judgments cited, supra. We feel that unless there is a provision of service itself, the liability to pay cannot be fastened on the provider or recipient. In fact, if this observation is followed, it would tantamount to agreeing that the Rule itself provides for levy of service tax, without relying on the provisions under the relevant section of the Finance Act. Department has also relied on the judgment of Hon'ble Supreme Court in the case of CC (Import), Mumbai Vs Dilip Kumar and Co. & Ors [Civil Appeal No. 3327 of 2007]. This was in the context of strict construction of notification. However, as we have not taken up the issue of eligibility of abatement notification, as discussed in earlier paras, this is not relevant. In fact, the observation of Hon'ble Court in para 43 is also relevant for present appeal, which is as under:
"43. There is abundant jurisprudential justification for this. In the Governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from its citizens towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the subject/assessee may warrant visualizing different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable (12) ST/26110/2013 to pay tax, and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the persons, as may arise within the strict language of the law. There cannot be any implied concept either in identifying the subject of the tax or person liable to pay tax. That is why it is often said that subject is not to be taxed, unless the words of the statute unambiguously impose a tax on him, that one has to look merely at the words clearly stated and that there is no room for any intendment nor presumption as to tax. It is only the letter of the law and not the spirit of the law to guide the interpreter to decide the liability to tax ignoring any amount of hardship and eschewing equity in taxation. Thus, we may emphatically reiterate that if in the event of ambiguity in a taxation liability statute, the benefit should go to the subject/assessee. But, in a situation where the tax exemption has to be interpreted, the benefit of doubt should go in favour of the revenue, the aforesaid conclusions are expounded only as a prelude to better understand jurisprudential basis for our conclusion. We may now consider the decisions which support our view."
21. Thus, even if there is any ambiguity in taxation provision, it is to be interpreted in favour of assessee and benefit should go to assessee.
22. Therefore, in view, of discussions, supra, and following the ratio laid down by coordinate bench, we find that at the threshold itself the service of GTA has not been provided by the truck operators to the appellant and therefore, the Rule 2(1)(d)(v) would not be applicable merely because they were initially paying the freight and thereafter, recovering the same from their customer. Further, as on this ground itself, demand is not sustainable, therefore, we are not examining the other grounds taken by appellant such as eligibility for abatement under Notification No.32/2004, as also, the grounds for non-invocation of extended period. Further, as the demand is not sustainable on merit itself, the imposition of penalty will also not sustain. Therefore, in view of the same the impugned order is liable to be set aside.
23. Appeal allowed with consequential benefit, if any, as per law.
(Pronounced in the Open Court on 11.09.2025) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Veda