2024 (3) TMI 1285 - AT - Service Tax

Transportation services with margin money over vehicle hire charges qualify as Goods Transport Agency Services with 75% abatement

M/s Aspinwall and Co. Limited Versus Commissioner of Central Excise and Service Tax, Tirunelveli

The CESTAT Chennai held that services involving transportation of goods with margin money collected over vehicle hire charges constitute Goods Transport ... Classification of services - Business Auxiliary Services (BAS) or Goods Transport Agency Services (GTA) - extra amount collected from the clients over and above the amounts actually paid to the vehicle owners on back-to-back basis - HELD THAT:- The undisputed fact in the present case is that the appellant renders service of transporting goods of their customers in exchange for a ‘consideration’ and for this purpose, the appellant hires vehicles from third party owners under the agreement. Further, the appellant’s customers are not privy to the agreement for hiring vehicles and the ‘Margin Money’ collected and retained by the appellant is nothing but the surplus of transportation income, over and above the hire charges paid, on which service tax is paid after availment of 75% abatement. In the appellant’s own case M/S. ASPINWALL & CO. LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE TIRUNELVELI [2019 (4) TMI 182 - CESTAT CHENNAI] for the previous period, this Tribunal allowed the appeal of the appellant by holding On perusal of the order as well as records, we do not find any element that would attract the activity or the amount collected by the appellant in relation to hiring of vehicles or transportation of goods to be falling under BAS. The impugned order is not sustainable in law and the same is set aside - appeal allowed. Issues involved:The issues involved in this case are:1. Classification of extra amount collected from clients under 'Business Auxiliary Services (BAS)'2. Denial of abatement claimed on extra amount collected3. Demand for service tax under Section 73(1) of the Finance Act, 19944. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994Issue 1: Classification of extra amount collected from clients under 'Business Auxiliary Services (BAS)'The appellant, a public limited company providing various services including Goods Transport Agency Services (GTA), hired vehicles from third-party owners for transporting goods. The Department issued a show cause notice questioning the classification of the extra amount collected from clients, contending it falls under BAS. The appellant argued that the 'Margin Money' collected had a nexus to GTA services and should not be taxed under BAS. The Tribunal found that the appellant's customers were not privy to the vehicle hiring agreements, and the 'Margin Money' collected was surplus transportation income subject to service tax under GTA services. The Tribunal referred to a previous case where a similar issue was decided in favor of the appellant, concluding that the impugned order was not sustainable in law.Issue 2: Denial of abatement claimed on extra amount collectedThe appellant claimed abatement at the rate of 75% on the entire consideration received from clients for GTA services, including the extra amount collected. The Department denied this abatement, arguing that the extra amount was not related to GTA services but fell under BAS. The Tribunal, after considering the submissions and previous decisions, held that the extra amount collected was part of the transportation income subject to service tax under GTA services, and the claim for abatement was valid.Issue 3: Demand for service tax under Section 73(1) of the Finance Act, 1994Following a service tax audit, the Department demanded service tax amounting to Rs. 4,45,888 under Section 73(1) of the Finance Act, 1994, along with interest. The Original Authority confirmed this demand, which was upheld by the Commissioner (Appeals). The appellant challenged this demand, arguing that the impugned order was passed without proper appreciation of facts and law. The Tribunal, after examining the facts and legal precedents, set aside the impugned order, finding it unsustainable in law.Issue 4: Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994Penalties were imposed under Sections 76, 77, and 78 of the Finance Act, 1994, for failure to pay service tax, non-filing of ST-3 returns under BAS, and suppression of taxable amounts received. The appellant contested these penalties, stating that the impugned order had traversed beyond the show cause notice. The Tribunal, after considering the arguments from both parties, set aside the impugned order, finding it not sustainable in law and allowing the appeal of the appellant with consequential relief, if any, as per law.