AI Drafter 
TaxTMI 
TaxTMI 
2018 (1) TMI 501
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 and 3 have been called upon to show cause as to why the services rendered by them should not be classified under the heading "Cargo Handling Services" and be taxed accordingly. 4. The facts as averred in the memorandum of petition and as emerging from the record are that the first petitioner is a body whose members are, inter alia, goods transport operators and engaged in the business of transportation of goods supplied by the customers. It is the case of the petitioners that the show cause notices issued by the second respondent are in excess of his jurisdiction and that the other members of the Association are likely to receive such show cause notices in due course. By the impugned show cause notices, the respondents have proposed to demand service tax from the petitioners under the category of "Cargo Handling Services", while it is the case of the petitioners that the services which have been provided by them fall under the taxable category of "Goods Transport Agency". To bolster their case, the petitioners have placed reliance upon circulars dated 6.10.2008 and 5.10.2015 issued by the Central Board of Excise and Customs (hereinafter referred to as "the C.B.E.C."). 5. It....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (xii) Shipping lines looks after containerized goods at discharge port in South India; (xiii) Shipping Lines or Customers undertake responsibility of loading of containerized goods on Lorry at discharge port in South India; (xiv) Consignee unloads the containerized goods at the place of consignee." 6. It is the case of the petitioners that they provide services of transportation of goods by road; the activities of loading and unloading of goods at loading point and discharge point are undertaken by the consignor or the consignee and that the petitioners provide trucks along with its container at the factory of the customers. 7. Based upon intelligence gathered by the second respondent that the petitioners had shown gross income in their income tax returns filed under section 194 of the Income Tax Act for the year 2012-13, but filed "Nil" ST-3 returns, the second respondent visited the office premises of the second petitioner on 11.3.2015 and recorded the statements of its Managing Director Shri Amar D. Kothari from time to time. The second respondent also visited the Rajkot Regional Unit and the Ahmedabad Zonal Unit of the third petitioner on 11.06.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... concerns classification of goods, even once the Tribunal decides the appeal, be it of the assessee of the department, further appeal would lie to the Supreme Court and not to the High court, which would be an additional ground why the court would not entertain the writ petition against the order of the adjudicating authority. It was further submitted that the petitioners have directly approached this court against a show cause notice and therefore also in the absence of any lack of jurisdiction on the part of the adjudicating authority or any other circumstances for invoking the writ jurisdiction of this court having been made out, the court may not entertain the petition and ask the petitioners to answer to the show cause notice and avail of the statutory remedy as available in law. It was, accordingly, urged that the petition deserves to be dismissed on this count alone. 9. On the other hand, Mr. Mihir Joshi, Senior Advocate, learned counsel with Mr. Hardik Modh, learned advocate for the petitioners, submitted that the circumstances necessary for invoking the writ jurisdiction of this court are clearly made out and hence this petition under Article 226 of the Constitution of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Oryx Fisheries Private Limited v. Union of India and others, (2010) 13 SCC 427, wherein the court held thus: "31. It is of course true that the show cause notice cannot be read hyper technically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a show cause notice, the person who is subject to it must get an impression that he will get an effective opportunity to rebut the allegations contained in the show cause notice and prove his innocence. If on a reasonable reading of a show cause notice a person of ordinary prudence gets the feeling that his reply to the show cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence. 32. Therefore, while issuing a show cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of packing or unpacking and if at all any activity of loading or unloading is undertaken, the same is merely incidental to the main activity of goods transport agency. It was pointed out that in the said circular, it has also been clarified that if the bill indicates the amount charged for cargo handling and transportation separately on actuals basis (verifiable by documentary evidence), then the tax would be leviable only on the cargo handling charges. Reference was made to a clarificatory circular being Circular No.104/7/2008-S.T. dated 6.8.2008 issued by the Central Board of Excise and Customs, wherein the Board has clarified that "goods transport agency" provides service to a person in relation to transportation of goods by road which is a single composite service. Goods transport agency also issues consignment note. The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nstructions issued by the Board. Reference was made to the affidavit-in-reply filed on behalf of the third respondent, to submit that with effect from 1.7.2012, the entire scheme of service tax has changed and the definition of "cargo handling service" has been done away with and therefore, there is no definition of "cargo handling service", whereas the definition of "goods transport agency" continues. Under the circumstances, it cannot be said that the circular issued by the Board does not apply because it is a clarification in terms of the circular in the new regime. In conclusion, it was urged that the services provided by the petitioners clearly fall within the ambit of "goods transport agency" and that the impugned show cause notices being without jurisdiction as being contrary to the circulars issued by the Board from time to time as well as being contrary to the statutory provisions of law, deserve to be quashed and set aside. 10 On the other hand, Mr. Ankit Shah, learned senior standing counsel for the respondents, submitted that with effect from 1st July, 2012, the scheme of the service tax has changed and the negative list of regime has been brought into force. It was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....handling service" as it stood prior to its substitution by the Finance Act, 2008 on 10.5.2008, to submit that the earlier definition provided that "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport. It was submitted that thus, under the said definition, cargo handling service did not include transportation. It was submitted that with effect from 16.5.2008, the definition of cargo handling service came to be amended by including the service of packing together with transportation of cargo or goods, with or without one or more other services like loading, unloading, packing, unpacking. Thus, transportation was included as an ingredient of cargo handling services. 10.3 It was submitted that once the members of the petitioners undertake the responsibility of delivery of goods from consignor to consignee and more particularly, when they are also providing cargo handling services, may be, with help from other service providers, the service provided by them w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted that if the petitioners were supposed to provide only the service of transportation by road then the customers would not have given the charges meant for the Shipping Companies to the petitioners. It was submitted that the petitioners have artificially bifurcated the charges into various components to nullify the liability of paying the service tax on the services provided from end to end. It was reiterated that if the petitioner companies had been registered under the "cargo handling service", no abatement would be admissible and the whole transaction from consignor to consignee would be covered under the service tax. It was, accordingly, urged that the petition being devoid of merits deserves to be dismissed. 12. Before adverting to the merits of the rival submissions, a brief reference may be made to the facts of the case. From the facts as emerging from the record, it appears that the activities undertaken by the members of the petitioner association are that upon receipt of an order from customers to transport goods from their place to persons who are mostly located in South India, the petitioners hire a truck along with an empty container for this purpose and send th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e same is relevant for the present purpose reads thus: "Cargo handling service 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (21), the term "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for noncontainerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and any other service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of cargo. The taxable service, as per sub-clause (zr) of clause (90), is any service provided, to any person, by a cargo handling agency in relation to cargo handling services. 3. The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....modes of transport, and cargo handling service incidental to freight; and (b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include, handling of export cargo or passenger baggage or mere transportation of goods." 16. Pursuant to various representations made by the All India Motor Transport Congress to the Government regarding difficulties being faced by goods transport agencies in respect of the service tax levied on goods transported by road service, the Central Board of Excise and Customs issued Circular: 104/7/2008-S.T. Dated 6th August 2008, the relevant portion whereof reads thus: "3. Issue: GTA provides service to a person in relation to transportation of goods by road in a goods carriage. The service provided is a single composite service which may include various intermediary and ancillary services such as loading/unloading, packing/unpacking, transshipment, temporary warehousing. For the service provided, GTA issues a consignment note and the invoice issued by the GTA for providing the said service includes the value of intermediary and a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce provided is to be classified under GTA service. Clarification: Cargo handling service [Section 65(105) (zr)] means loading, unloading, packing or unpacking of cargo and includes the service of packing together with transportation of cargo with or without loading, unloading and unpacking. Transportation is not the essential character of cargo handling service but only incidental to the cargo handling service. Where service is provided by a person who is registered as GTA service provider and issues consignment note for transportation of goods by road in a goods carriage and the amount charged for the service provided is inclusive of packing, then the service shall be treated as GTA service and not cargo handling service. 5. Issue 3: Whether time sensitive transportation of goods by road in a goods carriage by a GTA shall be classified under courier service and not GTA service? Clarification : On this issue, it is clarified that so long as, (a) the entire transportation of goods is by road; and (b) the person transporting the goods issues a consignment note, it would be classified as 'GTA Service'." 17. With effect from 1st July, 2012, a new system of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e treated as a single service based on the main or principal service. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The interpretation of specified descriptions of services in such cases shall be based on the principle of interpretation enumerated in section 66F of the Finance Act, 1994. Thus, if ancillary services are provided in the course of transportation of goods by road and the charges for such services are included in the invoice issued by the GTA, and not by any other person, such services would form part of GTA service and, therefore, the abatement of 70%, presently applicable to GTA service, would be available on it. 5. It is also clarified that transportation of goods by road by a GTA, in cases where GTA undertakes to reach/deliver the goods at destination within a stipulated time, should be considered as 'services of goods transport agency in relation to transportation of goods' for the purpose of Notification No. 26/2012-S.T., dated 20-6-2012, serial number 7, so long as (a) the entire transportation of goods is by road; and (b) t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....port in South India to the consignee's place, once the goods reach the port in Gujarat till they are unloaded at the port in South India, the petitioners avail services from other service providers on behalf of the customers for which they do not charge them anything. The petitioners issue invoice to the customers only in respect of the transport of goods from the place of consignor to the port in Gujarat and from the port in South India to the place of the consignee, if the consignee does not take delivery of goods at the port itself. Insofar as the service rendered by the shipping line is concerned, the shipping line issues invoice in favour of the petitioners, who in turn issue a debit note to the customer without adding any charge in respect of such service. 24. The expression "cargo handling service" was defined prior to the 2012. As per the definition of "cargo handling service" as it stood prior to 16.5.2008, "cargo handling service" essentially meant loading, unloading, packing or unpacking of cargo for all modes of transport and cargo handling service incidental to freight. After 16.5.2008, the definition of "cargo handling service" came to be expanded by including "ser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re merely ancillary to the main service provided by the petitioners, viz. transport of goods by road. Besides, even the service of loading and unloading is not provided by the petitioners, but by the shipping lines to the petitioners on behalf of the customers in respect of which the shipping line pays service tax as applicable. 26. Thus, even if the petitioners had not split up the transaction into three parts, viz. transportation by road, then unloading and loading at port and transportation by sea, followed by unloading and loading at the port and transportation by road, the transaction would not fall within the ambit of "cargo handling service" as defined under the Finance Act, 1994 as it stood prior to and after 16.5.2008 inasmuch as the petitioners do not provide the service of packing together with transportation. Insofar as the period after the negative list regime came into force is concerned, the definition of "cargo handling service" stands deleted and is no longer on the statute book. The respondents, however, appear to be categorizing such service on the basis of the definition of such service as it stood prior to the introduction of the negative list regime. Theref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne) to the petitioners, but under a debit note and not under an invoice. Therefore, in the entire process of transportation of goods from the consignor to the consignee there are two service providers involved. Firstly, the petitioners who provide the service of "goods transport agency" to the customer and secondly, the shipping line which provides service to the petitioners on behalf of the customer. Pertinently, neither the service provided by the petitioners nor by the shipping line includes any element of packing, which is a necessary ingredient for falling within the ambit of "cargo handling service" when transportation is one of the elements of such service. Therefore, even if it were to be held that it is the petitioners who are providing the services covered in entire transaction, no part of the transaction falls within the ambit of "cargo handling service" as envisaged under the provisions of the Finance Act, 1994 as amended from time to time. Therefore, the contention of the respondents that the service provided by the petitioners fall within the ambit of "cargo handling service" is misconceived. 28. Moreover, the circular dated 6th August, 2008 provides that a composi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad is the principal activity. 29. On behalf of the respondents the learned senior standing counsel have placed strong reliance on the provisions of section 66F of the Finance Act, which as it stood prior to its amendment by Finance Act, 2015, reads thus: 66-F. Principles of interpretation of specified descriptions of services or bundled services.-(1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service. (2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. (3) Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely- (a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character; (b) if various elements of such service are not naturally bundled in the ordinary course of business, it s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs, inasmuch as on a plain reading of sub-section (2) of section 66F of the Act it is amply clear that if a service meets with a specific description, such specific description has to be given a preference over a general description. In the present case, when the service provided by the petitioner falls within the specific description of "goods transport agency", the same has to be given preference over the general description of cargo handling service, which is not defined under the Finance Act after the introduction of the negative list regime. Insofar as the period prior to the introduction of the negative list regime is concerned, "cargo handling service" was defined under section 65(23) of the Finance Act. As discussed hereinabove, by no means can any part of the service rendered by the petitioners either directly or through other service providers falls within the ambit of such definition. Under the circumstances, the question of classifying such services as "cargo handling service" would not arise at all. 32. Insofar as the applicability of sub-section (3) of section 66F of the Finance Act is concerned, the same is applicable where taxability of bundled service is involve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o not fall within the ambit of "cargo handling service" and therefore, the question of considering the entire transaction as a cargo handling service would not arise. 34. In the facts of the present case, apart from the fact that the main activity of the petitioners is transportation by road and no cargo handling service activities are carried out by them, even if for the sake of assumption the services rendered by the shipping lines were to be considered as the services rendered by the petitioners, the essential character of the services rendered by the petitioners, viz., goods transport agency, would not be lost. If all the ancillary activities are attributed to the petitioners, then in view of the circulars dated 6th August, 2008 and 5th October, 2015, by including such services in the invoice the petitioners could have claimed abatement qua the entire transaction, which would result in payment of lesser taxes than those collected by the respondents on account of splitting up of the transaction into three parts. Therefore, the allegation that the exercise has been carried out to evade payment of service tax is without any substance. 35. Significantly, it is nobody's case t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ove referred circulars issued by the C.B.E.C. from time to time and are also contrary to the very basic definition of "cargo handling service" as it stood prior to 2012. The impugned show cause notices relate to the period prior to 2012 as well as post 2012, both of which periods are covered by the circulars issued by the C.B.E.C. in the context of "goods transport agency service". 37. In the impugned show cause notices, in paragraph 9.2.7.2, it has been stated that necessity of law for taxation under the class "cargo handling service" is that the service provided should be relating to or in relation to cargo handling by a cargo handling agency. The service provided should be integrally or inseparably connected with handling of cargo or attributable thereto without being a mere activity of transportation of such cargo since transport service independent of cargo handling is an exception under the scheme of levy by section 65(23) of the Act and it may be said that loading, unloading, packing or unpacking of cargo and handling of cargo for freight in special containers or noncontainerized freight and service provided by container freight terminal or other freight terminal for all ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....place of consignor in Gujarat to the place of consignee in South India, which in effect and substance is the transportation of goods and not cargo handling service. 41. In the affidavit-in-reply filed on behalf of the respondents, it has been stated that once the company undertakes the responsibility of delivery of goods from consignor to consignee and more particularly when the company is providing service, may be, with the help of other service providers, but taking help from other service providers does not change the nature of the service being provided by the aforesaid companies to its clients. Thus, even according to the respondents certain services are not provided by the petitioners directly, but are provided to the customers with the help of other service providers. If certain services are provided by other service providers, they would be discharging the service tax liability on such service. Therefore, once the service provider has paid service tax on the service provided by it, the question of taxing such service once again in the hands of the petitioners would not arise as the same would amount to taxing the same transaction twice. 42. In the light of the above d....