2025 (9) TMI 1060 - AT - Service Tax

Appeal allowed: service tax on gross C&F charges (1.4.2010-30.9.2014) paid; transport treated separate under Transport of Goods by Road

Ridhi Sidhi Logistics Versus Commissioner of Central Goods and Service Tax and Central Excise, Jodhpur

CESTAT, New Delhi allowed the appeal and set aside the impugned order, holding that during 1.4.2010-30.9.2014 service tax was payable on the gross amount ... Classification of services - whether the transportation charges recovered by the appellant should include as gross consideration received for ‘Clearing & Forwarding service’? - extended period of limitation - HELD THAT:- As per Section 67 of the Finance Act, 1994 during the disputed period i.e. 1.4.2010 to 30.9.2014, service tax was payable on the gross amount charged for the service provided. In this context, in so far as, Clearing and Forwarding Service and was concerned, it is found that the appellant had discharged service tax liability on the gross amount charged for the services so provided. It is also observed that the transportation service was a activity separate from the Clearing and Forwarding Service. It is imperative to note that no lump sum amount had been charged for Clearing and Forwarding Service which included transportation charges - Hon'ble Tribunal in the case of Commissioner of Central Excise, Lucknow vs. Technical Associates [2012 (6) TMI 242 - CESTAT, NEW DELHI] held that 'transportation of faulty transformer was made under a different contract while repair and maintenance of transformer was done under a different contract and both being different contracts are governed by their own terms, no merit in stay application and appeal of Revenue.' It is also noted that the aforesaid decision in Technical Associates [2012 (3) TMI 201 - ALLAHABAD HIGH COURT] was upheld by the Allahabad High Court-Lucknow bench. From the factual matrix, it is apparent that service tax had been paid on the gross amount charged for the services of 'Clearing and Forwarding Service' provided. In the present case, M/s. PBPL and M/s. PPPL are the consignor and the wholesalers are consignees. At this point, it is also imperative to note that the Appellant, for the transportation of goods by road, were under obligation to issue consignment note, as per Rule 4B of Service Tax Rules, 1994. In terms of this rule, the 'consignment note' means 'a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying Service tax whether consignor, consignee or the goods transport agency. In the instant case, the Appellants have issued consignment notes for the aforesaid activity. In view of the above, the payment of service tax under the head 'Transport of Goods by Road' is correct. The impugned order is set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether transportation charges reimbursed by the consignor to the clearing & forwarding agent for carriage from the godown to wholesalers form part of the gross consideration for 'Clearing and Forwarding Agent' service and are therefore taxable as part of that service. 2. Whether transportation performed by the appellant constituted an independent 'Transport of Goods by Road'/GTA service attracting liability on the consignor/consignee under the statutory rules and whether service tax paid under GTA (with applicable abatement/exemptions) discharges the tax liability in respect of such transportation. 3. Whether reimbursement of expenditure (freight/handling) constituted 'consideration' liable to service tax for the relevant period (2009-10 to 2012-13) in view of the later amendment explicitly including reimbursement within 'consideration'. 4. Whether invocation of extended period of limitation, interest and penalties was permissible on the facts - i.e., whether there was suppression of facts or a deliberate attempt to evade tax so as to attract extended limitation and penal consequences. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Inclusion of reimbursed transportation charges in gross consideration for Clearing & Forwarding (C&F) service Legal framework: Definition of 'Clearing and Forwarding Agent' and 'Taxable Service' under the Finance Act; valuation rule in force during the disputed period (service tax payable on gross amount charged for the service); Board circular clarifying valuation and who is responsible for payment in C&F arrangements. Precedent Treatment: The Tribunal relied on earlier decisions treating separately charged transport as distinct from contractual supply of C&F services and on administrative circulars clarifying that gross consideration for C&F ordinarily means remuneration/commission charged by the C&F agent. Interpretation and reasoning: The Tribunal examined the contractual terms showing a fixed service charge for C&F (Rs.5,000/month) and an express entitlement to reimbursement of freight and handling expenses. No lump-sum C&F price included transport; transportation was separately accounted for and reimbursed. The Tribunal accepted that C&F operations cover documentary and arrangement functions and do not necessarily include independent transport undertaken under a separate obligation and reimbursed distinctively. Administrative guidance was held persuasive as to valuation methodology. Ratio vs. Obiter: Ratio - where transport services are separately performed and separately reimbursed under the contract, such reimbursed transport charges do not form part of the gross consideration for C&F taxable service for the disputed period. Obiter - observations on general breadth of 'C&F operations' beyond the present facts. Conclusion: Transportation charges reimbursed by the consignor, when accounted for separately and not included in a lump-sum C&F charge, are not includible in the gross consideration for the C&F service for the relevant period; the taxability must be assessed as a separate GTA service. Issue 2 - Characterisation of transportation as independent GTA service and person liable to pay service tax Legal framework: Definition of 'Goods Transport Agency' and statutory rules (Rule 2(1)(d)(v) / Rule 2(1)(d)(i)(B)) fixing the person liable for service tax in relation to transportation of goods by road; Rule 4B consignment note definition and obligations; relevant notifications granting abatement/exemptions and conditions for consignor/consignee liability. Precedent Treatment: The Tribunal followed authorities recognizing that where a consignor/consignee meets the statutory description, the liability to pay service tax for transport rests on that person, and where a provider issues consignment notes and discharges GTA formalities, the activity is to be treated as GTA service. The Tribunal referenced decisions distinguishing forwarding functions from pure transport. Interpretation and reasoning: Facts showed freight for outward movement was borne by the consignor, transportation charges were reimbursed to the agent, consignment notes were issued, and the appellant was separately registered and paid tax under GTA (with 75% abatement or small consignment exemption where applicable). On plain reading of the rules, where consignor/consignee is a corporate body, they are the person liable to pay service tax; the appellant's issuance of consignment notes and GTA registration evidenced independent GTA activity. Administrative circular and rule definitions supported treating transport as separate taxable activity liable under GTA head. Ratio vs. Obiter: Ratio - when transport is performed and invoiced/reimbursed separately and the service-provider complies with GTA formalities (consignment notes, registration), the transportation is an independent GTA service and liability of tax rests as prescribed by the rules (usually on consignor/consignee); payment of tax by the agent under GTA (with abatement/exemption) is appropriate. Obiter - discussion on interplay between C&F and GTA where services are blended in other fact patterns. Conclusion: The transportation in the present factual matrix was an independent GTA service. Service tax discharged under the GTA head (with abatement/exemption where applicable) was correct and did not require duplication as part of C&F gross consideration. Issue 3 - Whether reimbursements were taxable as consideration during the disputed period despite later statutory amendment Legal framework: General principle that value for service tax during the disputed period included gross amount charged; the definition of 'consideration' was subsequently amended (w.e.f. 14.5.2015) to expressly include reimbursement of expenditure or cost. Precedent Treatment: The Tribunal relied on authorities holding that, prior to the explicit amendment, reimbursements payable to third parties or separately disbursed amounts that were not part of the agent's remuneration were not automatically includible as consideration for the principal taxable service, subject to contract and manner of invoicing. Interpretation and reasoning: The Tribunal noted the temporal operation of the amendment and held that for 2009-10 to 2012-13 the later enlarged definition of 'consideration' was not applicable. The reimbursement mechanism in the agreement showed freight was remitted as actual outflow on behalf of consignor and separately reimbursed, not as remuneration for C&F service. Thus, retrospective application of the later amendment was not warranted. Ratio vs. Obiter: Ratio - explicit statutory inclusion of reimbursements within 'consideration' applies only from the effective date of amendment; for earlier periods the nature of the contractual arrangement and invoicing controls whether reimbursements form part of taxable consideration. Obiter - policy rationale and caution against retroactive extension of tax base. Conclusion: Reimbursements of freight/handling for the disputed period did not constitute taxable consideration for C&F service by reason of the subsequent amendment; the demand to include such reimbursements in C&F valuation for the period in question was unsustainable. Issue 4 - Invocation of extended period, interest and penalties for alleged suppression Legal framework: Extended period of limitation and enhanced penalties require proof of suppression or deliberate evasion; routine filing of returns, payment under a claim of law and absence of deliberate concealment are relevant to the limitation enquiry. Precedent Treatment: The Tribunal considered jurisprudence holding that bona fide disputes of interpretation and payment of tax under an arguable view do not amount to suppression warranting extended limitation or penal consequences. Interpretation and reasoning: The appellant had filed returns and paid service tax under respective heads (C&F and GTA) and acted on a bona fide belief that transportation charges had been separately taxed under GTA. There was no evidence of conscious withholding or misrepresentation; audit detection led to show cause. The Tribunal found the issue to be interpretational rather than one of deliberate evasion; absence of proof of suppression prevented invocation of extended period and penalties based on suppression. Ratio vs. Obiter: Ratio - extended period and penal consequences cannot be invoked where the case involves a bona fide interpretational dispute and returns/payments have been regularly filed and no deliberate suppression is established. Obiter - remarks on burden of establishing deliberate suppression. Conclusion: Invocation of extended limitation, interest and penalties on the ground of suppression was not justified on these facts; consequential demands based on extended period do not survive. Overall Conclusion The Tribunal held that (a) transportation performed and invoiced/reimbursed separately pursuant to the contract is an independent GTA service and its charges are not includible in the gross consideration for C&F service for the relevant period; (b) payment of service tax under the GTA head (with statutory abatement/exemption where applicable) was correct; (c) the post facto statutory inclusion of reimbursement within 'consideration' is not operative for the disputed years; and (d) extended period and penalty could not be sustained in the absence of suppression or deliberate evasion. The impugned order sustaining demand was therefore set aside.