2022 (4) TMI 303 - AT - Service Tax

Non-payment of service tax - appellant though had paid freight, but had not paid the service tax for the transportation of sugarcane from the field to the factory - time limitation - Commercial Vehicle or not - Goods Transport Agency or not - invocation of extended period of limitation - HELD THAT - Revenue has placed reliance in Hon ble High Court of Allahabad High Court in the case of COMMISSIONER CENTRAL EXCISE VERSUS M/S KISAN SAHKARI CHINI MILLS LTD. AND ANOTHER 2017 (3) TMI 1786 - ALLAHABAD HIGH COURT , where it was held that In the present case, transporters transferring sugarcane from Cane Collection Centers to sugar mills and presenting bills for such service, squarely satisfy the requirement of Rule 2(d)(v) read with Section 65(50b) of Finance Act, 1994 - the transporters in the present case are clearly covered by the definition of Goods Transport Agency hence Assessees are liable to pay service tax being within the definition of person liable to pay service tax under Rule 2(d)(v). The only factual difference between the decision of the Hon ble Allahabad High Court and the case on hand are, as noted by the Hon ble High Court, that the sugarcane was transferred to sugar mills by individual truck owners who would charge for such transportation, by presenting bills fortnightly, whereas, here in the case on hand, the agriculturists themselves are transporting the sugarcane to the factory of the appellant and hence, there was no service rendered in relation to transportation of goods by road in a goods carriage. This is because, there was actual transportation and not in relation to, as observed in the order of this Bench in LAKSHMINARAYANA MINING COMPANY VERSUS COMMISSIONER OF CENTRAL TAX BENGALURU SOUTH GST COMMISSIONERATE 2019 (7) TMI 917 - CESTAT BANGALORE . The demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Taxability of service tax for transportation of sugarcane by farmers to the factory under Goods Transport Agency (GTA) service.

Analysis:
The appellant, a sugar manufacturer registered as a service receiver under GTA service, was issued a show-cause notice for not paying service tax of ?37,26,463 for transporting sugarcane from the field to the factory. The appellant contended that the demand was time-barred and that the transportation was done by farmers using their own tractors, not as a commercial service. The adjudicating authority confirmed the demand, leading to the appellant's appeal before the First Appellate Authority. The appeal was partially successful, reducing penalties but upholding the demand, prompting the current appeal.

The appellant argued that they only reimbursed farmers for transportation costs and did not engage transport agency services, thus not falling under GTA. They cited judicial precedents supporting their position. On the contrary, the Revenue supported the lower authorities' findings and referenced a judgment from the Allahabad High Court. The Tribunal found that the appellant contested both on merits and the larger period, with the Revenue failing to justify the demand.

In a similar case, Lakshminarayana Mining Co., the issue was the taxability of consideration paid for utilizing lorries to transport iron ore. The Tribunal concluded that tax liability arises only for goods transport agencies issuing consignment notes, not individual truck operators. The Tribunal found that the appellant's activity fell outside the taxable ambit of the Finance Act, 1994. The Allahabad High Court judgment in Kisan Sahkari Chini Mills Ltd. held that transporters transferring sugarcane to mills were covered under the Goods Transport Agency definition, making the mills liable for service tax.

The Tribunal noted the factual difference between the Allahabad High Court case and the current one, where farmers transported sugarcane directly to the factory. As there was no service "in relation to" transportation by a goods carriage, the demand was not sustainable. Therefore, the Tribunal set aside the impugned order, allowing the appeal with any consequential benefits as per the law.