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2025 (6) TMI 1176 - AT - Service TaxClassification of services - GTA services or Supply of Tangible Goods Service? - invocation of extended period of limitation - levy of penalty - HELD THAT - The Appellant s business is mainly transporting goods by road and the consideration is computed on per KM basis though many other conditions mentioned as to the computation of value of payable. These Contracts / Work Orders clearly specifies that service tax is to be paid by the service recipient who is paying freight i.e. the consignor as per Rule 2(1)(d)(v) of Service Tax Rules 1994. The Appellant has been mandated to comply with various conditions as to the operation and maintenance of these RMC vehicles compliance to central and state laws relating to Insurance PF etc. and also for exclusive usage of these vehicles - It is seen that all the incorporate required details of a consignment note like the details of vehicles consideration payable kilo meters run etc. though not issued per consignment basis. Further it is noted that the Tribunal Delhi and also the Tribunal Ahmedabad in the cases of Gunesh Logistics Vs. Commissioner of Central Excise Service Tax Jaipur-I 2019 (9) TMI 1419 - CESTAT NEW DELHI and in Prashant Logistics Vs. C.S.T. Vadodara-I 2023 (12) TMI 566 - CESTAT AHMEDABAD has analyzed the contracts entered into for transportation of RMC and held the service activity as classifiable under GTA service and not Supply of Tangible Goods. Even in the present appeal RMC trucks were exclusively used by the Appellant to provide transportation service and not the supply of tangible goods service. These trucks have been used by the Appellant themselves and the consideration was computed principally on KM basis though other miscellaneous charges are also included. These vehicles are always under the control and possession of the Appellant and insistence on complying to various Central and State Government laws and other conditions would not alter the nature of service provided. It is to be noted that the RMC companies have paid service tax applicable on reverse charge basis. Demand of service tax again under Supply of Tangible Goods Service would result in double taxation - The Appellant has used these vehicles and not the RMC companies for providing transportation service. Though the facts obtaining in appeal are different in certain aspects when compared against the case laws relied upon appropriate classification of the service is under GTA service. The nature of the service rendered is transportation of RMC and as such the demand of service tax as made under Supply of Tangible Goods in the impugned Order-in- Original No. 16/2014 (ST-COMMR.) dated 25.11.2014 is not sustainable. Supply of concrete pumps - HELD THAT - It is to be noted that there is a clause specifically mentioning that the service tax is payable by the Appellant. The Agreement is for pumping of concrete and not for transportation of concrete pump from one site to the other. Consideration is paid on the basis of the quantity of concrete pumped. Here there is no transportation of goods from one place to other like in case of ready-mix concrete. These pumps are used either at the LAC s plant or at various work sites and as such the demand raised in respect of concrete pumps is required to be confirmed under the supply of tangible goods service. Extended period of limitation - HELD THAT - It is to be observed that the classification of the service provided by the Appellant is highly contentious. The work orders issued by LAC clearly indicate that the service tax will be paid by RMC companies. The Appellant is basically a transporter of goods as such attributing any motive to evade payment of tax on the part of the Appellant is not tenable as held by the Hon le Supreme Court in the cases of Uniworth Textiles Ltd. Vs. Commissioner of Central Excise Raipur 2013 (1) TMI 616 - SUPREME COURT and CC Vs. Magus Metals Pvt. Ltd. 2017 (11) TMI 53 - SUPREME COURT . Whatever the service tax paid / payable is available as Cenvat credit for the RMC companies. For these reasons invoking extended period is not justified. Conclusion - The Lower Authority is directed to examine the records of the Appellant and quantify the service tax payable for the normal period on the consideration / hiring charges paid by the RMC companies to the Appellant in respect of concrete pumps. It need not be stated that the Appellant is required to pay interest along with service tax payable. However the penalties imposed are set aside. Appeal allowed in part.
The core legal questions considered by the Tribunal in this appeal are twofold: (i) the correct classification of the service rendered by the Appellant-whether it falls under Goods Transport Agency (GTA) services or under Supply of Tangible Goods Service as per the Finance Act, 1994; and (ii) the justification for invoking the extended period of limitation for service tax demand and the sustainability of penalties imposed under Sections 77 and 78 of the Finance Act, 1994.
Regarding the first issue, the Tribunal examined the definitions and legal framework governing GTA services and Supply of Tangible Goods Service. Section 65(50b) of the Finance Act, 1994 defines Goods Transport Agency as a person providing service related to transport of goods by road and issuing consignment notes. The issuance of consignment notes containing specific particulars is mandatory under Rule 4B of the Service Tax Rules, 1994 for GTA classification. Conversely, Section 65(105)(zzzzj) defines Supply of Tangible Goods Service as any service provided in relation to the supply of tangible goods, including machinery and equipment, for use without transferring right, possession, or effective control of such goods. The Tribunal analyzed the contractual arrangements between the Appellant and service recipients such as M/s. Lafarge and M/s. Larsen & Toubro. The contracts primarily involved transportation of Ready Mix Concrete (RMC) using specially equipped vehicles owned and operated by the Appellant. The contracts stipulated conditions including exclusive use of vehicles by the service recipients, compliance with labor and insurance laws, vehicle maintenance, repainting as per client specifications, and minimum kilometer guarantees with compensation clauses for shortfall. The Appellant raised bills on a per kilometer basis and issued consignment notes, albeit on a monthly rather than per consignment basis. The service recipients paid service tax on freight charges under reverse charge mechanism as consignors. The Tribunal gave significant weight to precedents from other Tribunals, notably the Delhi and Ahmedabad Benches, which had ruled that transportation of RMC by road using vehicles owned and operated by the service provider constitutes GTA service and not Supply of Tangible Goods Service. The Tribunal cited the detailed reasoning in Gunesh Logistics, where the nature of the contract was examined, and it was held that the appellant did not give vehicles on hire but provided transportation service using its own vehicles. The issuance of consignment notes and receipt of freight charges for transportation were critical factors in that determination. Similarly, the Chennai Bench decisions in Salem District Lorry Owners Association and Erode Lorry Owners Association cases reinforced the principle that transportation of goods, including petroleum products, by road under such contracts falls within GTA services and not Supply of Tangible Goods Service. Applying these principles to the facts, the Tribunal found that despite the contractual conditions imposed on the Appellant, the essence of the service was transportation of goods. The Appellant retained possession and control over the vehicles, and the service recipients did not operate the vehicles themselves. The contractual terms concerning vehicle maintenance, insurance, and exclusive use did not convert the nature of the service into supply of tangible goods. The Tribunal emphasized that the primary purpose and essential character of the contract must dictate classification, and here it clearly pointed to GTA service. The fact that the service recipients paid service tax under reverse charge on freight charges further negated the possibility of double taxation by classifying the service as Supply of Tangible Goods. On the second issue concerning the extended period of limitation and penalties, the Tribunal noted that the classification of the service was highly contentious and disputed. The contracts explicitly mentioned that service tax was to be paid by the service recipients. The Appellant's principal business was transportation of goods by road, and there was no evidence of deliberate evasion of tax. The Tribunal referred to Supreme Court precedents which held that invoking extended period requires a clear case of suppression or evasion, which was absent here. Consequently, the Tribunal held that invoking the extended period was unjustified and set aside the penalties imposed under Sections 77 and 78 of the Finance Act, 1994. Regarding the supply of concrete pumps, the Tribunal distinguished this service from transportation. The work orders showed that the Appellant provided and operated concrete portable HDRD pumps at the disposal of the service recipients for pumping concrete at various sites. The consideration was based on the quantity of concrete pumped rather than transportation. The pumps were stationed at the service recipients' premises and operated by the Appellant's personnel. The Tribunal found that this activity fell within the ambit of Supply of Tangible Goods Service since it involved supply of machinery and equipment for use without transfer of possession or control. The demand of service tax on this service was upheld but limited to the normal period, excluding extended period invocation. In summary, the Tribunal's key findings and conclusions are: Issue 1: Classification of Service
Issue 2: Extended Period and Penalties
Issue 3: Supply of Concrete Pumps
The Tribunal's reasoning includes the following crucial legal observations: "The Appellant has never ceased to have control and possession of these RMC vehicles. The Appellant has used these vehicles and not the RMC companies for providing transportation service." "The primary purpose of these contracts / work orders is for transportation of RMC from one place to other as per the direction of the consignors i.e., RMC companies." "Invoking extended period is not justified... attributing any motive to evade payment of tax on the part of the Appellant is not tenable." "The concrete portable 1800 HDRD pump will be stationed at any of their RMC stations and shall be at their disposal throughout the contract period... The Agreement is for pumping of concrete and not for transportation of concrete pump from one site to the other." Accordingly, the appeal was partly allowed: the service tax demand under Supply of Tangible Goods Service in respect of transportation of RMC was set aside, the demand relating to concrete pumps was upheld for the normal period, and penalties and extended period invocation were rejected.
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