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2023 (8) TMI 707 - AT - Service TaxClassification of services - supply of tangible goods for use or work of transportation of concrete for its customers? - providing services of transportation of Ready-mix Concrete (RMC) to Ultratech Cement Limited (RMC Division) by Transit Mixture Vehicles from batching plant of Ultratech Cement Limited Udhna Magdalla Surat to the construction sites. The claim of the appellant is that they are not provider of vehicles on rental basis whereas they have provided service of transportation of goods i.e. RMC to M/s. Ultratech Cement Limited for transportation of their goods from M/s. Ultratech Cement Limited to the sites of their customers. HELD THAT - From the plain reading of the terms and condition of the contract it is absolutely clear that M/s. Ultratech Cement Limited is concerned only about the transportation of RMC from their plant to their customer s site and the charges for such transportation is also on the basis of quantity of the goods and per kilometer basis. It is also observed from the clauses of the contract that entire operation and maintenance activity is the responsibility of the appellant only. The contract also prescribes that essential consignment notes of loads and obtain proper receipt from the customers after goods are delivered. It is also the fact that all the transporters to charge M/s. Ultratech Cement Limited as recipient of service for discharging service tax of such transportation. On the basis of these facts it is absolutely clear that the appellant are providing service of transportation of goods whereas the demand is raised under the category of service of Supply of Tangible Goods for Use. There are no hesitation to opine that as per facts of the present case the activity cannot be classified under the supply of Tangible Goods for Use service therefore the demand cannot be sustained. In the case of Gunesh Logistics 2019 (9) TMI 1419 - CESTAT NEW DELHI this Tribunal held that the appellant has been rendering GTA service by transporting RMC from one place to another as per the directions of the service recipient. The finding to the contrary recorded in the impugned order by the Commissioner that the appellant was not performing GTA service but was performing STG service cannot be sustained. From the above decision of the principal Bench of this Tribunal it can be seen that the facts such as transportation of RMC by similar vehicles for M/s. Ultratech Cement Limited for transportation from M/s. Ultratech Cement Limited plant to the customer s site of M/s. Ultratech Cement Limited it was held that appellant in that case are rendering GTA service by transportation RMC from one place to another as per the direction of the service recipient. Therefore the same is not classifiable under supply of Tangible Goods for Use service. Thus the appellant s service is correctly classifiable under Goods Transport Agency service for which service recipient M/s. Ultratech Cement Limited have discharged the service tax as required under Rule 2(d) of Service Tax Rules 1994 under reverse charge basis. Therefore the demand under the category of Supply of Tangible Goods service shall not sustain - appeal allowed.
The primary legal question considered by the Tribunal is whether the demand of service tax under the category of "Supply of Tangible Goods for Use" has been rightly confirmed against the appellant, or whether the appellant's activity amounts to the provision of transportation services of Ready Mix Concrete (RMC) for its customers, thereby attracting service tax under the classification of Goods Transport Agency (GTA) service.
Closely related issues include:
Issue-wise Detailed Analysis 1. Classification of Service: Supply of Tangible Goods for Use vs. Goods Transport Agency Service The appellant contended that they provided transportation services of RMC using their own fleet of transit mixer vehicles and did not supply vehicles on hire. The department contended that since the vehicles remained with the appellant but were deployed exclusively for the service recipient's purposes, the service constituted supply of tangible goods for use, attracting service tax under that category. The legal framework involves the definitions under the pre-negative and post-negative list regimes of service tax. Section 65(50b) defines a Goods Transport Agency (GTA) as a person providing transport of goods by road and issuing consignment notes. Section 65(105)(zzp) specifies taxable service by a GTA, while Section 65(105)(zzzzj) covers supply of tangible goods for use without transferring possession or control. The Tribunal examined the contract terms between the appellant and the service recipient, which explicitly required the appellant to transport RMC from the batching plants to construction sites using their own vehicles. The contract specified that the appellant was responsible for operation, maintenance, and upkeep of vehicles, and that transportation charges were payable based on quantity transported and distance travelled. The appellant was also required to issue consignment notes and obtain receipts from customers upon delivery. The Tribunal found that these terms clearly indicate that the appellant was engaged in transportation of goods rather than hiring out vehicles. The appellant maintained possession and control of the vehicles and bore operational costs, which negates the characterization of the service as supply of tangible goods for use. The contract's requirement for consignment notes further aligns with GTA service. Precedent was heavily relied upon, particularly a prior decision of the same Tribunal involving identical facts and parties, which held that transportation of RMC by vehicles owned and operated by the appellant constituted GTA service and not supply of tangible goods for use. The Tribunal noted that the Commissioner's contrary conclusion was based on a misreading of the contract, erroneously interpreting minimum quantity payments and vehicle deployment as vehicle hire rather than transportation service. The Tribunal also referred to the statutory provisions under the pre-negative and post-negative list service tax regime, emphasizing that all conditions for GTA service were met: transportation by road, issuance of consignment notes, activity performed for another person, and consideration received. 2. Interpretation of Contractual Terms The Tribunal underscored the importance of contract interpretation principles to discern the true nature of the transaction. It rejected the department's approach that focused on possession and control of vehicles alone, noting that the contractual obligations clearly indicated the appellant's role as transporter of goods rather than lessor of vehicles. Key contractual clauses highlighted include:
These clauses demonstrate that the appellant's service was the transportation of goods, not supply of vehicles. The Tribunal found that the department's assumption of vehicle hire was a flawed interpretation unsupported by the contract's express terms. 3. Applicability of Service Tax and Reverse Charge Mechanism The appellant submitted that the service tax liability, if any, was correctly discharged by the service recipient under reverse charge, as applicable to GTA services. The Tribunal agreed, noting that the appellant's service falls under GTA service, which attracts service tax liability on the recipient under Rule 2(d) of the Service Tax Rules, 1994. The Tribunal observed that the appellant and the service recipient had been filing ST-3 returns regularly, reflecting the service tax paid under the GTA category, further supporting the appellant's position. 4. Computation of Demand and Limitation Period The appellant challenged the demand computation, arguing that the value should have included cum-duty price as per Section 4(4)(d)(ii) of the Central Excise Act, 1944, and that the demand was raised beyond the limitation period under the proviso to Section 73(1) of the Finance Act, 1994. The Tribunal did not find it necessary to delve deeply into these points given the primary issue of classification was resolved in favour of the appellant. However, it noted the appellant's bona fide belief of non-liability to service tax under the supply of tangible goods category, supported by regular filing of returns and absence of suppression of facts. 5. Allegation of Suppression and Bona Fide Belief The appellant argued that the show cause notice was based on bald allegations without positive evidence of suppression or intent to evade tax. The Tribunal agreed that the issue was one of legal interpretation rather than factual suppression. It cited precedents establishing that bona fide belief on interpretation of law negates suppression and bars extended limitation for demand recovery. Significant Holdings "From the plain reading of the above terms and condition of the contract, it is absolutely clear that M/s. Ultratech Cement Limited is concerned only about the transportation of RMC from their plant to their customer's site and the charges for such transportation is also on the basis of quantity of the goods and per kilometer basis... It is absolutely clear that the appellant are providing service of transportation of goods whereas the demand is raised under the category of service of Supply of Tangible Goods for Use. We have no hesitation to opine that as per facts of the present case, the activity cannot be classified under the supply of Tangible Goods for Use service therefore, the demand cannot be sustained." "The appellant has been rendering GTA service by transporting RMC from one place to another as per the directions of the service recipient. The finding to the contrary recorded in the impugned order by the Commissioner that the appellant was not performing GTA service but was performing STG service cannot be sustained." Core principles established include:
Final determinations:
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