2025 (5) TMI 154 - AT - Service Tax

Classification of service - Goods Transport Agency Service (GTA) or not - service provider has not issued any consignment note to consider the activity as falling under GTA Service - reverse charge mechanism - Extended period of limitation - HELD THAT - In present case there is no such documents in whatever name available on record to presume the same as consignment note. As held by the Tribunal in the matter of Birla Ready Mix 2012 (12) TMI 736 - CESTAT NEW DELHI when the consignment notes are not issued by the operator they cannot be considered as a goods transport agency. As per the impugned order service tax is made under the category of transport of goods by road under Section 65(105)(zzp) and not under Goods Transport Operator the term used in Finance Act 1994 during the period from November 1997 to June 1998. As per the evidence on record the contract is for transfer of right to use the vehicle rather than for providing service of transportation and hence cannot be considered as GTA service or under the category of transport of goods by road as held by the adjudicating authority. 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 and none of them are satisfied. Conclusion - The appellant did not avail GTA services from the contractors as the essential condition of issuance of consignment notes by the service provider is not satisfied. The demand for service tax under Reverse Charge Mechanism on the appellant was unsustainable and the impugned order is set aside. Appela allowed.

The core legal questions considered by the Tribunal revolve around whether the service availed by the appellant qualifies as Goods Transport Agency (GTA) service and whether the appellant is liable to pay service tax under the Reverse Charge Mechanism (RCM) for the relevant periods. Specifically, the Tribunal examined: (i) the applicability of GTA service classification to the appellant's transactions, (ii) the necessity and evidentiary value of consignment notes issued by the service provider, (iii) the nature of the contractual arrangements between the appellant and truck owners/contractors, (iv) the interpretation of relevant statutory provisions and precedents regarding GTA services, and (v) the validity of the demand for service tax under RCM including the question of limitation period.

Regarding the classification of the service as GTA, the Tribunal considered the statutory definition under Section 65(50b) of the Finance Act, 1994, which defines a Goods Transport Agency as any person who provides service in relation to transport of goods by road and issues consignment notes, by whatever name called. The Tribunal noted that two conditions must be fulfilled for a service to qualify as GTA: the provision of transport service by road and the issuance of a consignment note. The appellant contended that they did not avail GTA services, as the contractors did not issue consignment notes and the contract was for vehicle hire rather than transportation service. The appellant emphasized that the consignment notes were issued by themselves and not by the contractors, and that the contract restricted the contractors from carrying goods other than those of the appellant, with the appellant retaining control over the goods and transit.

The Tribunal analyzed precedents, including the Birla Ready Mix case, where it was held that absence of consignment notes issued by the operator precludes classification as GTA. The Tribunal referenced the interpretation of Rules 4A and 4B of the Service Tax Rules, 1994, which require GTA to issue consignment notes, and emphasized that the statutory definition must be understood independently of these rules to avoid circularity. It was further noted that mere transportation activity does not automatically qualify a person as a GTA; the issuance of consignment notes is a critical element. The Tribunal also cited the Andhra Pradesh High Court's view that contracts for vehicle hire do not amount to transportation service contracts for tax purposes, reinforcing that the nature of the contract is determinative.

In the Chartered Logistics Ltd. decision, the Tribunal reiterated that only those who issue consignment notes qualify as GTA, and that transportation services by others fall under the negative list and are exempt from service tax. The appellant relied on this reasoning to argue that their contractors merely supplied vehicles and did not provide GTA services. The Tribunal also considered decisions where charges based on kilometers traveled, with no consignment notes issued, were held not to constitute GTA services, as the vehicles operated under the direction of the appellant rather than as independent transport agents.

The appellant challenged the demand on the ground that the consideration paid to contractors was for vehicle hire and not for GTA services, invoking revenue neutrality principles and citing Supreme Court decisions that emphasize the need for clear evidence and proper classification before imposing tax demands. The appellant also contested the invocation of extended limitation periods, relying on authoritative decisions that restrict such extensions to cases of fraud or suppression.

The Revenue's position, supported by the show-cause notice and adjudicating authority, was that the contractors issued consignment notes as per contractual clause 10.2.7, which contained details of consignments and served as conclusive evidence of the goods' nature and quantity. The Revenue relied on Tribunal decisions such as M.L. Agro Products Ltd., where the issuance of documents containing truck numbers, amounts, and load details was held sufficient to constitute consignment notes, thereby qualifying the service as GTA and justifying service tax demands under RCM. The Revenue argued that consignment notes need not follow a prescribed format and that documents accompanying goods identifying consignor, consignee, route, and goods suffice. The Revenue also cited the U.P. State Sugar Corporation case to support this broader interpretation.

In rejoinder, the appellant pointed out the absence of the actual contract on record and contended that the contract clauses were contradictory, invoking the Supreme Court's principle that where clauses are repugnant, the earlier clause prevails. The appellant emphasized that the consignment notes were issued by them, not the contractors, and that the bills raised by contractors were fixed charges inconsistent with consignment notes. The appellant argued that the Revenue failed to produce any admissible evidence of consignment notes issued by contractors, thus undermining the basis for classifying the service as GTA.

On the Tribunal's own examination, it was found that the impugned order's demand was premised on the service being GTA provided by contractors. However, the appellant's documents showed consignment notes issued by the appellant themselves, not by the contractors. The Tribunal observed that in the absence of any document issued by the contractors that could be equated to a consignment note, the service could not be classified as GTA. The Tribunal distinguished the M.L. Agro Products Ltd. decision on facts, noting that no similar vouchers or invoices were produced in the present case. The Tribunal reiterated the Birla Ready Mix principle that without consignment notes issued by the operator, the operator cannot be considered a GTA. It was further noted that the contract appeared to be for transfer of the right to use vehicles rather than transportation service, thus excluding the service from GTA classification.

Regarding the issue of limitation, while the appellant raised objections to the extended period invoked by the Revenue, the Tribunal did not find it necessary to delve deeply into this aspect given the substantive conclusion on the nature of the service.

In conclusion, the Tribunal held that the appellant did not avail GTA services from the contractors, as the essential condition of issuance of consignment notes by the service provider was not satisfied. The contract was for vehicle hire and not for transportation service, and the consignment notes were issued by the appellant, making them the GTA if at all. Consequently, the demand for service tax under Reverse Charge Mechanism on the appellant was unsustainable and the impugned order was set aside, allowing the appeals.

Significant holdings include the Tribunal's affirmation of the dual conditions for GTA classification: provision of transport service by road and issuance of consignment notes by the service provider. The Tribunal emphasized 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 and none of them are satisfied" in the present case. The Tribunal also preserved the principle from Birla Ready Mix that absence of consignment notes issued by the operator precludes GTA classification. Additionally, the Tribunal underscored that contracts for vehicle hire, even if involving transportation of goods, do not automatically attract service tax as GTA services unless the statutory conditions are met.

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