Tribunal upholds service tax liability on coal and lime transportation under turnkey contract

The Tribunal found a prima facie case against the demand for service tax on salt transportation but upheld the liability for service tax on the transportation of coal and lime under the turnkey contract. The appellants were directed to deposit a specified amount within a set timeframe to comply with the Tribunal's directive.

---

---

Issues: Challenge to demand of service tax, Education Cess, penalties under Finance Act, 1994 for Goods Transport Agency (GTA) service availed for transportation of inputs; Payment of service tax for transportation of salt; Liability for service tax on transportation of other inputs under turnkey contract.

Analysis:
1. Challenge to Demand of Service Tax: The appellants contested a demand of over Rs. 81 lakhs for service tax, Education Cess, and penalties under the Finance Act, 1994, related to GTA service for transporting inputs to the factory. The appellants argued that they had already paid service tax for transporting salt, availing abatement under Notification No. 35/2004-S.T. However, the Commissioner demanded service tax for salt transportation again. For the transportation of other inputs like coal and lime under a turnkey contract, the appellants claimed that no service tax was payable in the GTA category, contending that any tax should be paid by the transporter. The Tribunal found a prima facie case against the demand for service tax on freight for salt transportation, as evidenced by TR6 challans showing previous payment under the GTA category.

2. Liability for Service Tax on Transportation under Turnkey Contract: The Tribunal observed that the transportation of coal and lime from the port to the factory was part of a turnkey contract with M/s. South India Corporation (Agency) Ltd. The purchase order indicated payment by the appellants for multifarious services, including transportation. The Tribunal noted that the appellants failed to provide any exemption authority from paying service tax on the freight under the turnkey contract. The Tribunal estimated a demand of around Rs. 32 lakhs for this transportation, with a portion of it involving railway freight not covered under GTA service. Considering the financial hardships claimed by the appellants, the Tribunal directed them to deposit 50% of the estimated amount within four weeks for compliance with Section 35F of the Central Excise Act.

In conclusion, the Tribunal found a prima facie case against the demand for service tax on salt transportation but upheld the liability for service tax on the transportation of coal and lime under the turnkey contract. The appellants were directed to deposit a specified amount within a set timeframe to comply with the Tribunal's directive.

---