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TMI Blog2018 (1) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... ds from one port to the other is concerned, the petitioners are the recipients of such service from the shipping line and/or the cargo handling service on behalf of the customers. In the facts of the present case, while the petitioners provide the service of transportation, they do not provide any service of packing which is an essential ingredient of “cargo handling service” when transportation is a component thereof - in terms of the definition of “cargo handling service” as amended with effect from 16.5.2008, transportation was brought within its ambit, but only when transportation was in conjunction with packing (packing being the principal element) that it amounted to “cargo handling service”. In the facts of the present case, when the petitioners satisfy the ingredients of the “goods transport agency” as defined under the Finance Act, there is no question of placing the petitioners under the amorphous category of “cargo handling service” which is no longer defined under that Act - 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 petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 is the case of the petitioners that the members of the petitioner No.1 Association undertake the following activities for providing services to various customers: ( i) When the order is received from customers, it was a clear understanding between members of Petitioner No.1 and its customers that the Petitioners would merely provide service of transportation of goods by road whereas services at Port area and transportation of goods through waterways would be provided by Shipping Lines; ( ii) The Petitioners would raise a bill for transportation of goods by road and debit note for recovery of the expenses that would be incurred by shipping lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 11.06.2015 and recorded the statement of its representative Shri Rahul B. Modi from time to time. Subsequent thereto, the impugned show cause notices dated 8.10.2015 and 30.9.2015 came to be issued to the second and third petitioners respectively. It is the case of the petitioners that the impugned show cause notices have been issued contrary to the provisions of the Finance Act, 1994 (hereinafter referred to as the Act ) and are also contrary to the circulars issued by the C.B.E.C. from time to time, which has given rise to the present petition under Article 226 of the Constitution of India. 8. At the outset, Mr. Ankit Shah, learned senior standing counsel for the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 India is maintainable even at the show cause notice stage. It was further submitted that it is not as if in all cases involving a classification dispute a writ petition is not maintainable before the High Court. In support of such submission the learned counsel placed reliance upon the decision of the Supreme Court in the case of Union of India v. Aravali Min. Chem. (India) Pvt. Ltd. , 2000 (115) ELT 279 (SC) , wherein the High Court had relied upon a publication of the Central Board of Revenue to come to the conclusion that soap-stone was the same as talc and therefore, entitled to the benefit of the concerned exemption notification. The Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proceeded against and specially when he has the power to take a punitive step against the person after giving him a show cause notice. 9.3 Adverting to the merits of the case, the learned counsel invited the attention of the court to the facts of the case to submit that the main activity of the petitioners is of goods transport agency . Reference was made to the definition of goods transport agency as prevailing prior to the year 2012, as defined under section 65(50)(b) of the Finance Act, which provides that goods transport agency means any person who provides service in relation to transport of goods by road and issues consignm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. It was submitted that in view of the above circular, if a common invoice in relation to the composite service is issued, the goods transport agency would be entitled to abatement in respect of the entire transaction, whereas in the case of the petitioner association, a common invoice is not issued, and the invoice is issued only in relation to transportation of goods by road. It was submitted that even after the Finance Act came to be amended in the year 2012, and the negative list regime came to be introduced, the definition of goods transport agency remains the same and would therefore, be governed by the previous circulars issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 submitted that therefore, the circulars issued prior to the amendment in the Finance Act, would not be applicable subsequent to such amendment. It was submitted that the petitioners with a view to evade payment of service tax, have split the whole transactions into three parts, that is, from the place of the consignor to Kandla/Mundra Port by road, from Kandla/Mundra Port in Gujarat to Kochi/Tuticorin Ports in South India by sea route and from Kochi/Tuticorin Ports in South India to the place of the consignee by road. It was submitted that if the petitioners had been registered under the cargo handling services , no abatement w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 would fall within the ambit of cargo handling service inasmuch as taking help from other service providers does not change the nature of service that is being provided by the members of the petitioner association to its clients. It was submitted that the shipping lines raise bills in the name of the petitioners and if any service tax has been charged, the petitioners are well within their rights to take Cenvat credit of the same in accordance with the rules and regulations, however, that would not change the nature of the services rendered by the petitioners from cargo handling service to goods transport agent . It was submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the same vehicle to the place/factory of the customer/consignor. The consignor undertakes the responsibility of loading the goods. The goods are then transported to the port at Kandla/Mundra in Gujarat. For onward transport to the concerned port in South India, the petitioners approach the shipping lines which undertake the responsibility of loading the containerised goods at Kandla / Mundra Port in Gujarat. The shipping lines load the goods in the coastal vessel at the port. The customers/consignors give a declaration/undertaking to the Customs for coastal movement of goods and recognise the shipping lines as their authorized age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal 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 unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services. 3.1 The services provided in relation to export cargo and passenger baggage are excluded from tax net. 3.2 Mere transportation of goods is not covered in the category of cargo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 ancillary services. In such a case, whether the intermediary or ancillary activities is to be treated as part of GTA service and the abatement should be extended to the charges for such intermediary or ancillary service? Clarification: GTA provides a service in relation to transportation of goods by road which is a single composite service. GTA 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 taxation of service known as Negative List of Services came to be introduced which provided that all services except those specified in the negative list would be subject to tax. By the amendment, section 65 of the Finance Act came to be deleted and consequently the definition of cargo handling service stood deleted. However, a new definition of goods transport agency came to be introduced vide section 65B(26), which reads as under: Goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. 18. On a conjoint reading of the definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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) the GTA issues a consignment note, by whatever name called. 20. The facts of the case are required to be examined, in the light of the Circulars issued by the Board and the statutory provisions as prevailing prior to and after 2012 when the negative list regime was brought into force. 21. The record of the case shows that the petitioners issue invoice in favour of the consignor together with a consignment note. The invoices annexed along with the petitioners show that the service tax component is at the rate of 12% on road freight. The petitioners issue debit notes to the consignor towards the amount debited to his account towards reimbursement of sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners, 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 service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking. Thus, prior to 16.5.2008, cargo handling service meant only loading, unloading, packing or unpacking of cargo for all modes of transport and cargo handling service incidental to freight whereas with effect from 16.5.2008, for the first time transportation came to be brought within the ambit of cargo handling service, which however was limited to the service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking. Thus, insofar as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined 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. Therefore, even if cargo handling service is considered in terms of the earlier definitions, the service provided by the petitioners would not fall within its ambit. 27. Insofar as goods transport agency is concerned, as noticed earlier the definition continues to be the same even after the introduction of the negative list regime. In relation to goods transport agency the Central Board of Excise and Customs has issued clarificatory circulars both, before and after the introduction of the negative list regime. In terms of the circular dated 6th August, 2008 goods transport agency provides a service in relation to transportation of goods by road which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice. 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 composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified. 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 method of invoicing does not alter the single composite nature of the service and classification in such cases is based on essential character by applying the principle of classification enumerated in section 65A. Thus, if any ancillary/ intermediate service is provided in relation to transportation of goods, and the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cription 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 shall be treated as provision of the single service which results in highest liability of service tax. Explanation.-For the purposes of sub-section (3), the expression bundled service means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. 30. On behalf of the respondents, the learned senior standing counsel has submitted that in view of the provisions of subsection (3) of section 66F of the Finance Act, the taxability of a bundled service is required to be determined in the manner provided there under. It was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 involved. The expression bundled service has been defined under the Explanation to sub-section (3) of section 66F to mean a bundle of provision of various services where an element of provision of one service is combined with an element or elements of provision of any other service of services. In the opinion of this court, the question of bundling services would arise where more than one kind of taxable service is rendered by a service provider as part of the same transaction. In the present case, insofar as the petitioners are concerned, the only service provided by them is as goods transport agency . Insofar as the remaining services are concerned, such services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 that any part of the transaction has gone untaxed. Insofar as the goods transport agency component is concerned, the tax is paid by the customers on reverse charge basis and insofar as the component of shipping by sea is concerned, the shipping line pays the service tax thereon. What the respondents, however, want is to tax the entire transaction in the hands of the petitioners on the ground that the entire transaction amounts to cargo handling service which would fetch a higher rate of tax. At the cost of repetition it is stated that having regard to the definition of cargo handling service as defined prior to the introduction of negative list, no part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 modes of transport are subject matter of taxation under the class cargo handling service . That apart, any activity incidental to freight of cargo is also liable to be taxed under such class. Mode of transport is irrelevant for incidence of levy once the service provided meets the test of handling of cargo in the manner as envisaged by law. It also appears that it is not necessary that the cargo should only be meant for transport either by vessel in ships or aircrafts. 38. In clause 9.2.7.3 thereof, it has been observed that for the period prior to 1.7.2012, the service being provided by M/s Yamuna Shipping which includes arranging for vehicles/containers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 discussion, it is evident that the impugned show cause notices are contrary to the binding circulars issued by the Central Board of Excise and Customs from time to time. Under the circumstances, the petitioners are entitled to invoke the writ jurisdiction of this court. The contention that this petition would not lie against a show cause notice, therefore, does not merit acceptance. Besides, the petition does not involve any disputed question of fact and a legal issue is required to be decided on the basis of such facts and binding circulars issued by the Central Board of Excise and Customs, therefore, it is permissible for this court to entertain the writ petit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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