2019 (11) TMI 1166 - AT - Service Tax

Clearing and forwarding agent services - GTA service - It is the contention of the Revenue that the Second Agreement has been entered into by the appellant with Akzo during the validity of First Agreement in order to avoid payment of service tax on C F service, hence it appeared that the Second Agreement was with sole intention to pay service tax on 25% of the value under Goods Transport Agency Service‟ and to avoid the service tax on 75% on the gross value. Whether the territory freight agreement, which has been entered upon by the Appellant with its principal (Akzo) on 01.01.2013 is required to be considered as a part of First Agreement dated 01.10.2011, and therefore, the value of the transportation service is required to be added for computation of service tax under the Clearing and forwarding services being undertaken by the Appellant? HELD THAT - On reading of the terms and conditions of the two agreements, it is evident that the second agreement is offer for GTA service for the first time after execution of the second agreement which is specific to the transportation of the goods of the principal as per their direction. Therefore, the first agreement cannot be treated as a part of the second agreement as contended by the Revenue. In this regard, we also find that both the agreement has to be read in whole which is complete in itself. The CBEC trade notice No. 87/97 dated 14/07/1997 makes it clear that the C F agent‟s responsibility is restricted to arranging dispatch of goods as per the direction of the principal by engaging transport of his own or through third party transporter as authorised by the principal. Thus, the activity of C F agent is primarily responsible for delivery and forwarding and not the transport activities as such. As per the agreement in case of exigency the appellant was to arrange for the transportation of consignments on behalf of the principal from the approved transporters. It is a clear admission on part of the appellant that no such transportation has ever been arranged by them on behalf of their principal till the second agreement was executed between them, which was specifically for transportation of the goods. Validity of Consignment note - HELD THAT - The appellant has disclosed the levy of service tax on the basis of weight of consignment except distance covered in kilometres mentioned therein. The consignment note issued by the appellant appears to contain all the relevant information including the payment of service tax by consigner but for the actual amount which is written as TBB (to be billed). The appellant by arrangement with their principal has decided to have monthly settlement of transport bill consignment wise which is also evident from the ledger produced by the appellant - there is no force in the arguments raised by the Revenue regarding inappropriate consignment note. The impugned order is not sustainable, accordingly, there is no question of imposition of any interest and penalty also - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of services under Clearing and Forwarding (C&F) Agent and Goods Transport Agency (GTA).
2. Clubbing of service tax for C&F services and GTA services.
3. Validity of consignment notes under Rule 4B of Service Tax Rules.
4. Applicability of extended period of limitation.
5. Revenue neutrality and the principle of cum tax benefit.
6. Validity of show cause notice issued post-service tax audit.
7. Admissibility of new evidence (CA certificate).

Detailed Analysis:

Issue 1: Classification of Services under C&F Agent and GTA
The appellant, M/s Synergy Baxi Logistics, was registered for C&F Agent and GTA services. The Revenue contended that the appellant entered into a second agreement with Akzo Nobel India Limited (Akzo) to avoid paying full service tax on C&F services by classifying part of the service under GTA, thereby paying tax on only 25% of the value. The appellant argued that C&F and transportation services are independent services rendered under separate contracts, and should not be clubbed together for service tax purposes. The Tribunal agreed, noting that the two agreements were distinct and unrelated, with the first agreement exclusively for C&F services and the second for transportation services.

Issue 2: Clubbing of Service Tax for C&F Services and GTA Services
The Revenue's argument that the second agreement was part of the first to evade tax was rejected. The Tribunal emphasized that both agreements should be read as complete in themselves, and the appellant's activities under each agreement were distinct. The Tribunal referred to the CBEC Trade Notice No. 87/97, which clarified that C&F agents' responsibilities are limited to arranging dispatches as per the principal's directions, not transportation. The Tribunal cited several case laws, including E V Mathai & Co. vs. CCE, which held that transportation and C&F services are distinct and cannot be clubbed for tax purposes.

Issue 3: Validity of Consignment Notes under Rule 4B of Service Tax Rules
The Revenue argued that the consignment notes issued by the appellant did not meet the requirements of Rule 4B, as they did not show the distance covered in kilometers and the actual amount, only indicating "TBB" (to be billed). The Tribunal found that the consignment notes contained all relevant information, including the payment of service tax by the consignor. The Tribunal accepted the appellant's explanation that the monthly settlement of transport bills was an arrangement with their principal, supported by ledger entries and a CA certificate.

Issue 4: Applicability of Extended Period of Limitation
The appellant argued that the extended period of limitation should not apply, as Akzo discharged service tax under reverse charge and the issue involved interpretation of law. The Tribunal did not find it necessary to address this argument in detail, as it had already decided the case on merits.

Issue 5: Revenue Neutrality and the Principle of Cum Tax Benefit
The appellant contended that the entire exercise was revenue neutral, as Akzo was entitled to credit for the service tax paid by the appellant. The Tribunal did not delve into this argument, as it had already determined that the impugned order was not sustainable on merits.

Issue 6: Validity of Show Cause Notice Issued Post-Service Tax Audit
The appellant argued that the show cause notice was issued following an unconstitutional service tax audit, citing the Delhi High Court decision in Mega Cabs Pvt. Ltd. vs. Union of India. The Tribunal did not address this argument in detail, as it had already decided the case on other grounds.

Issue 7: Admissibility of New Evidence (CA Certificate)
The Revenue objected to the CA certificate submitted by the appellant, as it was not presented before the adjudicating authority. The Tribunal dismissed this objection, noting that the CA certificate was submitted at the Tribunal's direction and supported the appellant's case.

Conclusion:
The Tribunal held that the impugned order was not sustainable, as the C&F and transportation services were distinct and should not be clubbed for service tax purposes. The Tribunal allowed the appeal with consequential benefits, if any, and did not find it necessary to address other grounds raised by the appellant. The order was pronounced in open court on 26.11.2019.

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