Custom, Excise & Service Tax Tribunal
Klf Nirmal Industries P Limited vs Calicut on 16 October, 2024
Service Tax Appeal Nos. ST/20899, 20900/2015
ST/20645, 20646, 20648, 20649/2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2
Service Tax Appeal No. 20899 of 2015
(Arising out of Order-in-Appeal No. 654 & 655/2014-ST dated
27.11.2014 passed by Commissioner of Central Excise, Customs &
Service Tax (Appeals), Cochin-18).
KLF Nirmal Industries Pvt., Limited
Fr.dismas Road, Irinjalakuda,
Thrissur
Kerala -680121 .......... Appellant(s)
VERSUS
Commissioner of Central Excise, Calicut
CR Building, Mananchira, Calicut
Kozhikode
Kerala - 673001 ....... Respondent
WITH
(i) Service Tax Appeal No. 20900 of 2015 (Arising out of Order-in-Appeal No. 654 & 655/2014-ST dated 27.11.2014 passed by Commissioner of Central Excise, Customs & Service Tax (Appeals), Cochin-18).
(ii) Service Tax Appeal No. 20645 of 2022 (Arising out of Order-in-Appeal No. COC-EXCUS-000-APP-237&238- 2022 dated 13.06.2022 passed by Commissioner (Appeals) Central Tax, Central Excise & Customs Cochin).
(iii) Service Tax Appeal No. 20646 of 2022 (Arising out of Order-in-Appeal No. COC-EXCUS-000-APP-237&238- 2022 dated 13.06.2022 passed by Commissioner (Appeals) Central Tax, Central Excise & Customs Cochin).
(iv) Service Tax Appeal No. 20648 of 2022 (Arising out of Order-in-Appeal No. COC-EXCUS-000-APP-237&238- 2022 dated 13.06.2022 passed by Commissioner (Appeals) Central Tax, Central Excise & Customs Cochin).
(v) Service Tax Appeal No. 20648 of 2022 (Arising out of Order-in-Appeal No. COC-EXCUS-000-APP-237&238-2022 dated 13.06.2022 passed by Commissioner (Appeals) Central Tax, Central Excise & Customs Cochin).
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Service Tax Appeal Nos. ST/20899, 20900/2015 ST/20645, 20646, 20648, 20649/2022 Appearance:
Shri P. Raghunathan, Advocate for the Appellant Shri Rajesh Shastry, Authorised Representative for the Respondent CORAM:
Hon'ble P.A. Augustian, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) Final Order Nos. 21600 - 20605 / 2024 Date Of Hearing:17.04.2024 Date Of Decision: 16.10.2024 Per: Pullela Nageswara Rao The issue in the present appeals is whether the appellant is entitled for refund of the amounts paid as service tax under reverse charge mechanism (RCM) on transportation charges paid to individual goods carriage/truck owners, who do not issue any consignment note by whatever name called.
2. The brief facts are, M/s. KLF Nirmal Industries Pvt., Ltd., the Appellant is manufacturing Coconut Oil and allied products and for conducting the activity of manufacture and sale of products, the Appellant had availed 'inward' and 'outward' transportation from individual truck owners and vehicle owners for transporting raw material as well as delivery of the finished goods. The Appellant is registered under the service tax category of 'transport of goods by road'. The Service tax on such 'inward' and 'outward' transportation charges paid by the Appellant during the period in dispute is drawn and paid by the Appellant in terms of Section 68(2) of the of the Finance Act, 1994. According to the appellant, since the payment was on a mistaken belief, Appellant had filed 6(six) refund claims, and the Page 2 of 8 Service Tax Appeal Nos. ST/20899, 20900/2015 ST/20645, 20646, 20648, 20649/2022 Adjudication authority issued show cause notices directing the Appellant as to why the refund should not be rejected on various grounds.
Appellant had made detailed submissions and thereafter Adjudication authority as per the 6(six) impugned orders dated 25.10.2010, 19.03.2012, 29.03.2016, 10.02.2017 rejected the refund claims on unjust enrichment and also as time barred. Aggrieved by said orders 6(six) appeals were filed before Commissioner (Appeals) who, vide Orders-in-Appeal dated 27.11.2014, 08.06.2022, dismissed the appeals. Aggrieved by the impugned orders, present 6 (six) appeals ST/20899, 20900/2015 and ST/20645, 20646, 20648, 20649/2022 were filed before this Tribunal.
3. Since the issue in all the 6(six) appeals is common they are being disposed by this order.
4. The Learned Counsel for the Appellant during the hearing submits that the Appellant is eligible for the due amounts as claimed, since the said amounts were paid as service tax on freight and transportation charges to individual truck owners under the mistaken belief that service tax is payable on such freight amounts. The Learned Counsel also relied on the judgment of Hon'ble High Court of Karnataka in the matter of CCE Vs. M/s. Motorola Ltd.,- (2008 (11) STR 555 (Kar), wherein Hon'ble High Court held that the amount paid by mistake in excess of duty payable cannot be termed as duty and hence rule of time bar provided under Section 11B of the Central Excise, Act, 1944 is not applicable to excess amount paid over duty, thus, refund of such amount is admissible. The Learned Counsel also relied on the decision in the matter of M/s Nataraj & Venkat Associates Vs. Assistant Commissioner of Service Tax, Chennai- A18 (2009 (404), Page 3 of 8 Service Tax Appeal Nos. ST/20899, 20900/2015 ST/20645, 20646, 20648, 20649/2022 judgment of the Hon'ble High Court of Madras and also the judgment of the Hon'ble High Court of Karnataka in the matter of M/s. KVR Construction Vs. Central Excise.
5. As regards the issue on merit the Learned counsel submits that the transportation charges paid to individual truck owners are not exigible to service tax under the category of 'goods transport agency' (GTA) in terms of Section 65(50b) read with Section 65(105)(zzp) of the Finance Act, 1994.
6. Learned Counsel submits that the Appellant had paid service tax on freight paid to 'goods transport agencies' on the basis of consignment notes issued by them for the year 2011 to 2012 onwards and this fact has also been intimated to the Range Superintendent, which has already been acknowledged in the show cause notice, itself. However, the Appellant was not liable to pay service tax on the transportation charges paid to the individual truck owners, who do not utilize the services of any 'goods transport agency', and do not issue any consignment note, since they themselves don't qualify to be a 'goods transport agency'. The Learned Counsel also draws our attention to the decisions of the Tribunal in the matter of CE & CE, Gundoor Vs. M/s Kanagadurga Agro Oil Products Pvt., Ltd., & Ors-2009 (15) STR 399 (Tri. Bang), M/s Salem Corporative Sugar Mills, Dharmapuri District Vs. CC, Salem (STO 2010 CESTAT 83) and submits that from the above said decisions of the Tribunal, it is well settled that there is a distinction between an individual truck owner or the 'operator' and 'agency' in order to establish that the services of individual truck owners hired by the Appellant are liable to service tax under the category of 'Goods Transport Agency' (GTA) in terms of Page 4 of 8 Service Tax Appeal Nos. ST/20899, 20900/2015 ST/20645, 20646, 20648, 20649/2022 Section 65(50b) of the Finance Act, 1994. Learned Counsel also relied on the decision in the matter of M/s. Capricorn Transverse Pvt., Ltd., Vs. CC, Raighat -2014 (11) TMI 165 (CESTAT, Mumbai) and M/s Sahaj Marketing Vs. CC, Ahmedabad-2014 (2) TMI 331 (CESTAT, Ahmedabad). The learned counsel further submits that the Hon'ble Tribunal in the following cases also held that the individual owners cannot be brought within the meaning of 'Goods Transport Agency'; M/s Bheema Sahakari, Ltd., Vs. CC, Pune-2015 (10) TMI 627 (CESTAT, Mumbai), M/s Indira Gandhi Bharatiya Vs. Commissioner of Central Excise-2015 (11) TMI 148 (CESTAT, Mumbai)
7. The Learned Counsel also draws our attention to the scope of Negative list of Services effective from 01.07.2012. Section 66D(p) of Finance Act, 1994 reads as under:-
Services by way of transportation of goods -
(i) by road except the services of -
(A) a goods transportation agency; or (B) a courier agency;
(ii) by an aircraft or a vessel from a place outside India to the first customs station of landing in India; or
(iii) by inland waterways;"
8. The Learned Counsel submits that it is made very clear that the government has no intention to levy service tax on the services by way of 'transportation of goods by road' except when the services of a 'goods transportation agency' or 'courier agency' is involved. Learned Counsel further submits that on similar facts, the service tax demanded from M/s. Anchor Structural Engineering and Contractors in Page 5 of 8 Service Tax Appeal Nos. ST/20899, 20900/2015 ST/20645, 20646, 20648, 20649/2022 Palakkad was dropped by the Adjudication authority, itself vide Order- in-Original No. 13/2011-ST dated 31.05.2011 and in the case of M/s. MC Paul & Sons Market Road, Irinjalakkuda vide Order-in-Original No. 33/2010-ST dated 26.03.2010, where the Adjudicating authority categorically held that there is no 'Goods Transport Agency' service is involved as the taxable service is the service provided by 'goods transportation agency' and not the service provided by the truck owners or truck operator.
9. The learned counsel as regards the unjust enrichment submits that, the payment was made on reverse charge basis on the transportation charges and also produced the cash payment voucher issued to individual truck owners, while transporting the goods and submits that the freight charges are demanded without showing any services tax. Moreover, once the service tax payment is made on reverse charge basis, the question of unjust enrichment is not applicable.
10. Learned Authorised Representative (AR) for the Revenue reiterated the finding in the impugned order and also draws our attention to the judgment of Hon'ble High Court of Madras in the matter of CCE Vs. M/s KMB Granites - 2014 (35) STR 63 (Mad), wherein it is held that individual operators would also be covered within the meaning of expression 'commercial concern' as appeared under Section 65(50b) of Finance Act, 1994.
11. On rejoinder, the Learned Counsel for the Appellant submits that the ratio of the judgment of the Hon'ble High Court of Madras relied upon by the Learned AR is unsustainable on the ground that the Hon'ble High Court held that, " In the light of the decisions thus given by us in Page 6 of 8 Service Tax Appeal Nos. ST/20899, 20900/2015 ST/20645, 20646, 20648, 20649/2022 CMA. No. 3079 8. & 3080 of 2011 (cited supra), we set aside the order of the Customs Excise and Service Tax Tribunal and hold that the individual operator would also be covered within the meaning of expression 'commercial concern' as appeared under Section 65(50b) of Finance Act. Consequently, the appeals in CMA No. 2567 of 2010 and CMA No. 2573 of 2010 are allowed and the order of the CESTAT is set aside" and allowed the appeal. Thus, the Hon'ble High Court only considered the issue whether the individual truck operator can also be covered within the meaning of expression 'commercial concern' as appeared under Section 65(50b) of the Finance Act, 1994 and not considered the relevant entry in the Finance Act, 1994. Learned counsel further submits that the said finding is not relevant in the Appellant's case as the term 'commercial concern' has already been replaced by 'any person' during the relevant time.
12. The learned counsel further submitted that the issue is no more res integra as the Hon'ble CESTAT in a number of decisions, the latest being in M/s. Bharat Swabhiman (Nyas) Vs. Commissioner of Customs Central Excise and Service Tax, Dehradun (Final order No. 50060/ 2022 dated 27.01.2022- CESTAT, New Delhi), wherein it is held that:-
"17. The next issue that remains to be decided is whether the appellant is liable to pay service tax on the freight amount paid by it on a reverse charge mechanism.
18. 'Goods transport agency' service has been defined in section 65(26) of the Finance Act to mean any person who provides service in relation to transport of goods by road and issues consignment notes, by whatever name called. In the present case, consignment notes have not been issued and so the activities cannot be said to be covered under 'goods transport agency' services.Page 7 of 8
Service Tax Appeal Nos. ST/20899, 20900/2015 ST/20645, 20646, 20648, 20649/2022
19. In this connection it would be useful to refer to the decision of the Tribunal in Bhoramdeo Sahakari Shakhar Utpadam Karkhana Vs. Commissioner of Customs, Central Excise & Service Tax, Raipur, wherein it has been held that service tax can be levied only if consignment notes are issued.
20. Thus, service tax liability could not have been fastened on the appellant under the reserve charge mechanism."
13. Heard both sides and perused the records.
14. We find that it is well settled that there is a distinction between an individual truck owner or the 'operator' and 'agency' in order to establish that the services of individual truck owners hired by the Appellant are not liable to service tax under the category of 'Goods Transport Agency' (GTA) in terms of Section 65(50b) read with Section 65(105)(zzp) of the Finance Act, 1994. Further, we find that the individual truck owners have not issued any consignment note, by whatever name called.
15. In view of the above discussion and the decisions of the Tribunal the Appeals are sustainable.
16. Accordingly, the appeals are allowed with consequential relief, if any, in accordance with law.
(Order pronounced in open court on 16.10.2024) (P.A. Augustian) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) sasidhar Page 8 of 8