2012 (12) TMI 736 - AT - Service Tax

Good Transport Agency - demand of service tax - The appellant is engaged, in manufacturing Read Mix Concrete ( RMC for short). They had hired Transits Mixers , that is, vehicles specially designed for carryings RMC from place of manufacture to place of delivery of the goods. The vehicles were provided by the owners to the appellant for their use as per terms of a contract. The appellant paid consideration to the vehicle owners which involved certain payments on monthly basis and certain payments based on the number of kilometres run. Revenue demanded tax on the consideration paid by the appellant to the vehicle owners, considering it as a consideration for services of Goods Transport Agency Held that - The agreement does not demonstrate that the operator has any special rights or responsibility about the goods as is the case of goods entrusted to a Goods Transport Agency. This obviates the need to issue consignment notes which normally is a document of title for the goods when it is in the custody of the transporter. There is one clause to the effect that the operator will obtain proper receipts from customers after the goods are delivered. Thus by itself cannot make the contract to be that of Goods Transport Agency as defined in section 65 (50) (b) of Finance Act, 1994. When consignment notes are not issued by the operator they cannot be considered as a Goods Transport Agency . The mere fact that the operator is doing activity of transportation cannot make the operator a Goods Transport Agency . So the operators in this case cannot be considered as Goods Transport Agencies . This issue is already examined by the Andhra Pradesh High Court in the case of G.S. Lamba and Sons Versus State of Andhra Pradesh (2011 (1) TMI 1196 - ANDHRA PRADESH HIGH COURT) though in the context of State Sales Tax. The Court has held that this type of contract is one for transfer of right to use the vehicle rather than for providing service of transportation - in favour of assessee.

Summary

Issues:
Tax demand on consideration paid to vehicle owners for transport services.

Analysis:
The appellant, engaged in manufacturing Read Mix Concrete, hired "Transits Mixers" for transporting goods. Revenue demanded tax on the consideration paid to vehicle owners, treating it as payment for services of a "Goods Transport Agency" received by the appellant. The appellant argued that they were not a Goods Transport Agency as they did not issue consignment notes and the activity was merely leasing vehicles. The contract terms showed that the operators were responsible for the vehicles' availability and maintenance, not for the goods' custody, eliminating the need for consignment notes.

The Revenue argued that payments to operators were linked to kilometres run, and operators were responsible for delivering goods and obtaining acknowledgments. However, the contract terms indicated that the operators' responsibilities were limited to the vehicles' operation and maintenance, with no custodial rights over the goods. As per the definition in the Finance Act, a Goods Transport Agency issues consignment notes, which the operators did not, thus not meeting the criteria.

The Tribunal noted that the Service Tax Rules required Goods Transport Agencies to issue consignment notes, which the operators did not. The distinction between a Goods Transport Agency and a Goods Transport Operator was crucial, with the latter not liable for service tax. Previous judgments, such as the Andhra Pradesh High Court's decision, supported the view that such contracts were for the transfer of the right to use vehicles, not for providing transportation services. Therefore, the Tribunal set aside the tax demand orders and allowed the appeals.