2024 (6) TMI 348 - AT - Service Tax

Classification of services - Transportation of Goods by Road services or not - exemption from payment duties is available under N/N. 12/2015 or the activity was of merely supplying the truck/lorries/tankers for transportation of the branded fuel of companies like M/s. BPCL and Essar Oil Ltd. to companies customers - HELD THAT - The work of transportation of BPCL goods was awarded by M/s. Shreenath Co. to the appellant as per freight charges mutually agreed based on per kilometre/per kilolitre basis depending upon the charges agreed by BPCL. The perusal of both these documents pursuant to these contracts clarifies that the appellant had transported branded fuel of BPCL for M/s. Shreenath Co. against the payment received as freight charges. Similar is the set of document with the similar terms and conditions with respect to M/s. Hari Priya Filling station and M/s. Vishnu Priya Filling Station - Perusal of these documents reveal that none of them is talking about taking truck/tanker, on hire, for transporting branded fuel of the oil companies. The amount in question received by the appellant is specifically mentioned as the freight charges. There is no hire/rent agreement for taking truck lorries from the appellant for the purpose. The documents rather reveal that the appellant has stepped into the shoes of the main contractors who had agreed to transport fuel in truck/tankers for the oil companies. The Ld. Commissioner denied the benefit of above notification on assumption that the recipient of the services i.e M/s FCPL is not a Goods Transport Agency. However, in the present matter FCPL has issued consignment notes/ LRs for transportation of goods, hence M/s FCPL is clearly covered under the definition of Goods Transport Agency Service and if at all there is any Service Tax liability it is on the service recipient of FCPL i.e. M/s Reliance Industries Ltd. In view of this there are no reason for denying the benefit of the exemption under this entry to the appellant. CESTAT Ahmedabad in the case of CHARTERED LOGISTICS LIMITED VERSUS C.C.E. -AHMEDABAD-II 2023 (7) TMI 883 - CESTAT AHMEDABAD held that services of transportation of goods by a person other than GTA are clearly exempt under Section 66D (P)(i)(A) of the Finance Act, 1994. Since the activity is held purely to be a service of transportation of goods (branded fuels) by road, not by GTA, it is covered under the negative list/list of exempted services in terms of Section 66D(p)(i)(A) of Finance Act - the demand against the amount received from M/s. Vishnu Priya Filling Station is held to have been wrongly dropped. The demand as was proposed with respect to incentives received by the appellant from the oil companies, on miscellaneous receipts including bad debts, written off, balances return off, miscellaneous income and other income totalling to an amount of Rs.1,92,03,908/- has already been dropped by the appellant holding all those income to have been received by the appellant towards the trading activities which does not invite service tax. Department is not in appeal against the said part of the order - there are no reason to differ from the findings arrived while dropping the said demand. However, the demand of service tax of Rs.1,63,12,805/- is hereby set aside. The impugned Order-in- Original is set aside - appeal allowed.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Eligibility for exemption under Section 66D of the Finance Act.
3. Validity of demand and penalties imposed.

Summary:

1. Classification of Services Provided by the Appellant:
The appellant, registered under Construction Services, was observed to have received income booked u/s 194C of the Income Tax Act, indicating payments to contractors and sub-contractors. An investigation revealed that the appellant provided trucks to firms for transporting branded fuels, which was considered taxable under "Supply of Tangible Goods Service" (STGS). The appellant argued that the income was from transportation of goods by road, not hiring out trucks, and thus should be classified as transportation services.

2. Eligibility for Exemption under Section 66D of the Finance Act:
The appellant claimed that their services fell under the negative list u/s 66D(p) of the Finance Act, exempting transportation of goods by road from service tax. The adjudicating authority initially rejected this claim due to the absence of consignment notes, which are mandatory for classification as Goods Transport Agency (GTA). However, the Tribunal found that the appellant's activities were indeed transportation services, not hiring out trucks, and thus exempt under Section 66D(p)(i)(A).

3. Validity of Demand and Penalties Imposed:
The Show Cause Notice proposed a recovery of Rs. 3,55,16,713/- as service tax for the period 2013-14 to 2017-18, along with interest and penalties u/s 78 of the Finance Act. The adjudicating authority confirmed a demand of Rs. 1,63,12,805/- and dropped Rs. 1,92,03,908/-. The Tribunal set aside the confirmed demand, holding that the appellant's activities were exempt from service tax. The Tribunal also noted that the department did not appeal against the dropped demand, thus it attained finality.

Conclusion:
The Tribunal concluded that the appellant's services were transportation of goods by road, exempt under Section 66D(p)(i)(A) of the Finance Act. Consequently, the demand of Rs. 1,63,12,805/- was set aside, and the appeal was allowed. The Tribunal refrained from reversing the dropped demand as the department did not appeal against it. The impugned Order-in-Original was set aside, and the appeal was allowed.