2017 (6) TMI 60 - HC - Service Tax

Court rules in favor of Private Container Train Operator in tax dispute with Indian Railways

The court ruled in favor of the Petitioner, a Private Container Train Operator (PCTO), in a case challenging a Clarification on Service Tax Demand on ... Classification of services - haulage charges - whether the services would be classified as support charges or otherwise? - Held that: - there is such a Circular No. 334/8/2016-TRU dated 29th February, 2016, which clarifies that the services provided by the Indian Railways to CTOs is a service of ‘Transport of Goods by Rail’ and, therefore, eligible for abatement of tax treatment i.e., for abatement @ 70% of the value of haulage charges collected from the Petitioner - the SCN which raise a demand of service tax by treating 'haulage' as 'support services' stands negated by the aforementioned Circular - petition allowed - decided in favor of assessee. Issues:Challenge to a Clarification on Service Tax Demand on Haulage Charges paid to Indian Railways by a Private Container Train Operator (PCTO).Analysis:The Petitioner, a Private Container Train Operator (PCTO), engaged the Indian Railways for hauling containers on the Railways Network, paying haulage charges as per a Concession Agreement and Circulars. The challenge was against a Clarification issued based on a decision by the Central Board of Excise and Customs (CBEC) and a Show Cause Notice (SCN) by the Directorate General of Central Excise Intelligence (DGCEI) seeking to raise Service Tax demand on haulage charges re-classified as 'Support Services' under the reverse charge mechanism.During a previous hearing, the Respondents were informed about a circular requiring withdrawal of the impugned SCN. Upon further instructions, it was acknowledged that Circular No. 334/8/2016-TRU clarified that services provided by Indian Railways to CTOs are considered 'Transport of Goods by Rail' eligible for abatement of tax treatment at 70% of haulage charges. Consequently, the impugned SCN dated 23rd March, 2015, treating haulage as support services, was quashed by the Court.The judgment disposed of the writ petition in favor of the Petitioner, emphasizing the significance of the circular in determining the tax treatment of haulage charges paid to Indian Railways by Private Container Train Operators.