2025 (4) TMI 887 - AT - Service Tax

Eligibility for abatement of 75% as provided under N/N. 26/2012 dated 20.06.2012 - contracts entered only for GTA services - HELD THAT - There is no truth in the allegation of the Department that the respondent had raised a single bill for transportation charges and Custom House Agent charges. In the instant case it is observed that the respondent who issued consignment notes in terms of Rule 4B of the Service Tax Rules 1994 ought to be regarded as the GTA service provider and accordingly they are entitled to avail the 75% abatement in terms of N/N. 26/2012-S.T. dated 20.06.2012. It is further noted that in respect of GTA service the liability is on the recipient of service under reverse charge mechanism and wherever the respondent had rendered the service in the capacity of a goods transport agency they have paid Service Tax after availing abatement. The respondent cited the specimen declarations submitted by the service recipients confirming payment of service tax on reverse charge. It is observed that under Section 68(2) of the Act read with Notification 30/2012-ST dated 20.06.2012 specified persons paying freight were liable to pay service tax on GTA services received. In the instant case the respondent- GTA was liable to tax only for providing services to non-specified persons in which cases it duly charged and paid the applicable service tax. The ld. adjudicating authority has given a categorical finding after examining all the contracts and records available before him. Thus there are no reason to disagree with the above findings of the ld. adjudicating authority. Conclusion - i) The GTA services rendered by the Respondent are distinct and independent from CHA services. ii) The Respondent is entitled to the 75% abatement on GTA services under Notification No. 26/2012-S.T. iii) The demands raised by the Department for the disputed periods are not sustainable and are barred by limitation to the extent applicable. There are no infirmity in the impugned order dropping the demand of service tax raised in the notice - appeal of Revenue dismissed.

Summary

The core legal questions considered by the Tribunal in this appeal filed by the Revenue against the order dropping Service Tax demands are:

(i) Whether the transportation of goods by road (GTA) services rendered by the Respondent are integrally part of the Custom House Agent (CHA) services or are independent taxable services.

(ii) Whether the Respondent is eligible to avail the 75% abatement on the gross value of GTA services under Notification No. 26/2012-S.T. dated 20.06.2012.

(iii) Whether the value of GTA services should be included in the taxable value of CHA services under Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006.

(iv) Whether the demands raised by the Department are barred by limitation.

(v) Whether the Respondent's separate registration and billing for GTA and CHA services preclude the Department's claim of combined valuation.

(vi) Whether the imposition of penalty under Section 78 of the Finance Act is justified in view of the bona fide difference of opinion.

Issue-wise Detailed Analysis

1. Nature of Services Rendered: CHA Service vs. GTA Service

The legal framework involves the definitions under Section 65(35) and Section 65(105)(h) of the Finance Act, 1994, which define taxable services including Custom House Agent services and Goods Transport Agency services. The CHA service relates to activities in connection with the entry or departure of conveyances or import/export of goods, including handling, documentation, and related formalities. GTA service involves transportation of goods by road and issuance of consignment notes as per Rule 4B of the Service Tax Rules, 1994.

The Department contended that transportation activities formed an inherent part of CHA services and thus the value of GTA services should be included in CHA taxable value, disallowing the abatement on GTA service. The Respondent argued that GTA services were rendered under separate contracts, with distinct registration and billing, and that they issued consignment notes as GTA service providers, thereby qualifying for the abatement.

The Tribunal examined the contracts, bills, consignment notes, and registration details. It was found that the Respondent had three types of contracts: composite CHA and GTA, CHA only, and GTA only. The Respondent paid Service Tax on composite and CHA-only contracts without availing abatement, and on GTA-only contracts after availing 75% abatement.

Reliance was placed on precedents including E.V. Mathani & Co. v. Commissioner of Central Excise, Bhagyanagar Services v. Commissioner of Central Excise, and Commissioner v. United Shippers Ltd., which held that transportation charges are not includible in the value of other taxable services when separately contracted and billed.

The Tribunal held that the transportation service rendered by the Respondent was independent and distinct from CHA service, supported by issuance of consignment notes and separate billing. The Department failed to produce evidence that GTA services were provided by third parties or that the Respondent merely procured GTA services on behalf of clients.

2. Eligibility for 75% Abatement on GTA Services

Notification No. 26/2012-S.T. provides for 75% abatement on the value of GTA services, recognizing that the actual taxable value is only 25% of the gross amount charged. The Department challenged the Respondent's entitlement to this abatement, alleging that the GTA service was part of CHA service and thus ineligible.

The Tribunal noted that the Respondent had complied with the statutory requirements for GTA service providers, including issuance of consignment notes, separate registration, and filing of separate returns for GTA services. The Respondent also produced Chartered Accountant certificates certifying correct payment of Service Tax and abatement claims.

The Tribunal found no merit in the Department's contention and upheld that the Respondent was entitled to avail the 75% abatement on GTA services rendered independently.

3. Application of Rule 5(2) of Service Tax (Determination of Value) Rules, 2006

Rule 5(2) deals with valuation where a taxable service provider procures taxable services from others and provides a combined service. The Department sought to apply this rule to include the value of GTA services procured from third parties into CHA service value.

The Respondent demonstrated that GTA services were not procured from third parties but were provided by themselves, as evidenced by consignment notes and contracts. The Tribunal observed that the Department failed to prove the contrary.

Thus, the Tribunal held that Rule 5(2) was not applicable as the Respondent was the actual GTA service provider and GTA and CHA services were provided under separate contracts.

4. Limitation on Demands Raised

The Respondent contended that the demands for periods prior to the audit objection dated 12.02.2014 were barred by limitation under Section 73(1) of the Finance Act, as there was no evidence of fraud or suppression of facts.

The Tribunal noted the absence of any mala fide or suppression and observed that the show cause notices covered periods extending beyond the limitation period. While the Tribunal did not elaborate extensively on limitation, it accepted the Respondent's contention that the extended period was not invokable.

5. Separate Registration, Billing, and Reverse Charge Mechanism

The Respondent had obtained separate registrations for CHA and GTA services and maintained separate accounts and filings. They issued consignment notes in compliance with Rule 4B and raised separate bills for GTA services, charging Service Tax on the net value after abatement.

Further, under Section 68(2) read with Notification 30/2012-ST, the liability to pay Service Tax on GTA services is on the recipient under reverse charge for specified persons. The Respondent produced declarations from service recipients confirming payment under reverse charge where applicable.

The Tribunal accepted these facts and held that double taxation by taxing the same service under CHA head would be illegal and unjustified.

6. Penalty under Section 78 of the Finance Act

The Respondent submitted that the dispute was a bona fide difference of opinion on classification and valuation of services, hence no penalty should be imposed. The Tribunal did not find any justification for penalty, given the Respondent's compliance and absence of malafide.

Significant Holdings

The Tribunal's legal reasoning includes the following crucial observations:

"The Department has not brought in any evidence to substantiate their allegation that the GTA service rendered by the respondent is part of their CHA service. It is on record that the respondent has been separately registered for providing GTA service and they have been issuing 'consignment notes' in the capacity of a GTA. It is seen that the respondent has been raising separate bills and paying Service Tax under the head of 'GTA service' after availment of 75% abatement."

"Therefore, even I accept the allegation made in the Show Cause Notices that GTA service is provided by the third party, then also I cannot accept the proposal of the Show Cause Notices that the value of GTA service should be added with CHA service while arriving the taxable value as the GTA service and CHA service were provided under separate contracts."

"On the basis of above judgments and the documents submitted by the noticee I hold that the GTA service and CHA service was provided by the noticee separately. Therefore, the question of addition of the value of GTA service in the value of CHA service under Rule 5 of Service Tax (Determination of Value) Rules 2006 as procurer of service GTA does not arise."

"The respondent who issued consignment notes in terms of Rule 4B of the Service Tax Rules, 1994 ought to be regarded as the GTA service provider and accordingly, they are entitled to avail the 75% abatement in terms of Notification No.26/2012-S.T. dated 20.06.2012."

"The respondent had entered into separate written contracts with their clients and raised separate bills. In respect of composite contracts ... they paid Service Tax without availing any abatement or exemption applicable for GTA service. And where the contract is for CHA Service, they pay Service Tax under CHA on the consideration received for undertaking such activity."

"The Department failed to adduce any evidence that the consignment note being issued by any third party service provider while alleging that GTA service was actually provided by the third party while the noticee mere produced the same."

The Tribunal's final determinations are:

- The GTA services rendered by the Respondent are distinct and independent from CHA services.

- The Respondent is entitled to the 75% abatement on GTA services under Notification No. 26/2012-S.T.

- Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 is not applicable as the Respondent is the actual GTA service provider and services are under separate contracts.

- The demands raised by the Department for the disputed periods are not sustainable and are barred by limitation to the extent applicable.

- The Respondent's separate registration, billing, and compliance with reverse charge provisions preclude double taxation.

- No penalty under Section 78 is warranted due to bona fide difference of opinion.

Accordingly, the Tribunal upheld the order dropping the Service Tax demands and rejected the Revenue's appeal.