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TMI Blog2022 (2) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... ranging for vehicles/containers, loading of goods at the place of Consignor in Gujarat by them, transportation of containerized cargo to Ports, Unloading of containerized cargo at Ports, handling of containerized cargo at Ports including payment of various port charges, loading of containerized cargo in costal vessel by Shipping Companies on behalf of them, transportation of sea route, unloading & handling of containerized cargo at ports by Shipping Companies on behalf of them, delivery of empty containers to Shipping Companies after the goods are unloaded at the place of Consignee which may not be classified under GTA. The said services suitably classified as Cargo Handling Service prior to the period 01.07.2012 and handling of cargo other than GTA after the period 01.07.2012. The impugned show cause notice proposed the service tax demand of Rs. 5,83,58,364/- along with interest and penalty. It was also proposed imposition of penalty upon the Directors Shri Pranav V. Hindocha and Shri Mahesh J. Der, under the provisions of Section 77(1)(C) and 78 of the Finance Act 1994. 1.1 The adjudicating authority dropped the demands vide OIO No. BVR-EXCUS-000-COMM-10-2019-20 dated 31.05.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of goods by road is covered under 'Goods Transport Agency Service'. Service provider who provide composite service like packing, loading, unloading with transportation of goods are classified under Cargo Handling Service or Goods Transport Agency Services depending their essential or predominant character of the service provided. The Adjudicating authority failed to appreciate that the matter does not only pertain to the Goods Transported by Road, but several activities have been carried out by them. The Adjudicating authority has further erred in holding that the assessee was acting as a pure Agent in this case without any value addition and had fulfilled all the condition laid down under Rule 5 (2) of Service tax (Determination of Value) Rules, 2006 on the ground that actual receiver of Service by the shipping lines is the Consignor or Consignee and the assessee acted as pure agent and therefore, it becomes a revenue neutral case wherein the service tax has been charged by the shipping line and the same has been paid. The assessee was not acting as 'Pure Agent' of their customers as there was not contractual agreement between the assessee and their service recipients. The Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nloading and handling of cargo whether in container or otherwise may merit classification under the said category irrespective of fact of mode of transportation, but by any means transportation of goods in container whether road and / or sea cannot be classified under the cargo handling service. It is clearly evident from the invoices that respondent had charged for road transportation and reimbursed the actual amount for sea transportation paid to shipping line on behalf of recipients of service either consignor or consignee. Thus not provided any service of Cargo Handling Service as defined under the Finance Act, 1944. For the purpose of classifying the activities under "Cargo Handling" one must provide service of loading, unloading, packing or unpacking of cargo, cargo handling service provided for freight in special container or for on containerized freight, service provided by a container freight terminal or any other freight terminal, for all modes of transport, cargo handling service incidental to freight, service of packing together with transportation of cargo or goods, with or without one or more of other services likes loading, unloading, unpacking. Respondent had not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of service under Section 65A is dis-away with effect from 01.07.2012, principles of interpretation of specified description of service or bundled service were incorporated under Section 66F of the Finance Act, 1944 w.e.f. from 01.07.2012 He also invites attention towards clarification issued by CBIC vide Circular No. 165/16/2012-ST dated 20.12.2012. Thus, for the purpose of registration and payment of service tax same classification were continued, therefore, it cannot be said that there is not category of classification is available and there cannot be two different criteria for classification of service, Registration and payment of Service tax and levy of Service tax. There was no change in the definition of "Goods Trnasport Agency" as well as levy & payment of service tax on GTA prior to 01.07.2012 and w.e.f 01.07.2012. The Respondent had not only raised consignment Note/Truck Loading Slips/ Lorry Receipts bearing Serial Number, date, consignor's name, consignee's name, from to, back to, container number, seal number, name of transport, truck number, weight etc but also raised invoice for road transport freight, LR number etc with almost all similar information as prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 043 (Tri. Mumbai) ? (iii) Whether arrangement of services of Coastal Sea Transportation of Containerized Cargo and/or Handling of Cargo at load port and discharge port on payment of such amount on behalf of recipient of service on actual reimbursement basis can be considered as cost incurred by the respondent in the capacity of "Pure Agent" within the meaning of Explanation 1. To sub-rule (2) of Rule 5 of Service Tax (Determination of Value) Rules, 2006? (iv) Whether such cost or expenditure viz. payment towards transportation and handling charges incurred (after 2012-13 to 2014-15) can be included in the value as provided under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 for the purpose of charging service tax while providing taxable service of Goods Transport Agency and covered by the decision of Hon'ble High Court of Delhi and Hon'ble Apex Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. as reported in 2013(29) STR 9 (Del) and 2018 (10) GSTL 401 (SC)? (v) Whether extended period as provided under Section 73 of the Finance Act, 1994 can be invoked just merely respondent fail to pay tax and/or issue involved is interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mode of transportation but by any means transportation of goods in container whether by road and/or sea cannot be classified under the Cargo Handling Service. It is a fact on record that respondent had provided services of transportation of goods by road in a container in the capacity of 'Goods Transport Agency' and arrange services of handling of cargo at load port and dispatch port as well as sea transportation on reimbursement of amount on actual basis from recipient of services. 6.2 On this issue, the board had issued a clarification No.B.11/1/2002-TRU dated 01.08.2002, the relevant para of the said clarification are reproduced below:- "2. As per clause (21), the term "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cription; (b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, insofar as this criterion is applicable; (c) when a service cannot be classified in the manner prescribed in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub-clauses which equally merit consideration. In the present case, the Goods Transport Agency and/or services in relation to transport of coastal goods are more specific service therefore, import classifiable under clause (zzp) of Section 65(105)- Goods Transport Agency read with Section 65(50b) of the Finance Act, 1994 and clause (zzzzl) & (zr) of Section 65 (105) "Transportation of Coastal Cargo" and "Cargo Handling Service" is general one. Therefore, services provided by respondent are rightly merit classified under GTA. We further find that even if it is presumed that services provided by the respondent are composite services consisting of combination of different service which cannot be classified as per clause (a) of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly 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 are 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 charges, if any, for such services are included in the invoice issued by the GTA, and not by any other person, such service would form part of GTA service and, therefore, the abatement of 75% would be available on it. 4. Issue 2: GTA providing service in relation to transportation of goods by road in a goods carriage also undertakes packing as an integral part of the service provided. It may be clarified whether in such cases service provided is to be classified under GTA service. Clarification: Cargo handling service (Section 65(105)(zr)] means loading, unloading, packing or unpacking of cargo and includes the service of packing together with transportation of cargo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be that of a 'convention service' since a 'mandap keeper' includes official, social as well as business functions whereas a 'convention service' covers conventions only which is like an official function. Hence in this case the service would not be exempt from service tax. 4. Similarly, in each case where such problems arise the proper Central Excise officer has to decide on merits as to which is the more specific category and charge tax accordingly." In view of the above clarification, in the instant case even if, entire transaction is to be considered as a composite service then also the form and substance of the transaction is in the nature of transportation of goods by road and sea and not handling of cargo by any means therefore, activities carried out by the respondent cannot be considered as Cargo Handling Service. 6.5 We find that the revenue has failed to take note of clarification issued by CBIC Circular No.B.11/1/2002-TRU dated 01.08.2002 which reads as under:- 4. A point has been raised as to what would be the value of service tax in a case where transport and cargo handling service is provided in a composite manner. The measure of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transportation is shown separately in the invoice, no service tax can be demanded on such component of value. The said decision of the tribunal was upheld by the Hon'ble Apex Court and department's Civil Appeal was dismissed as reported in COMMISSIONER Vs. UNITED SHIPPERS LTD.- 2015 (39) S.T.R. J369 (SC). The tribunal while holding the same has placed reliance upon decision of tribunal as well as CBIC Circular (supra). 6.7 In view of the above decision, which has attained finality as upheld by the Hon'ble Supreme Court the same being binding upon all the ratio of the decisions and clarification is squarely applicable in the present case. As regard the period after 01.07.2012, though, practice of levy of service tax based on classification of service was departed and service was defined under Section 65B(44) of the Finance Act, 1994. The levy of service tax was under Section 65B of the Finance Act, 1994 on the value of all services other than specified in the negative list. The negative list is given under Section 66D of the Finance Act, 1994. The base of interpretation of specified description of service or bundled service were incorporated under Section 66F of the Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es', such amendment may not be necessary and the officers in the field formations may provide necessary guidance to the taxpayers in this regard. Directorate General of Systems will be making necessary arrangements for display of the list of 120 descriptions of services and their corresponding Accounting Codes in Form ST-1 and Form ST-2 as may be necessary." As per the above clarification for the purpose of registration and payment of service tax same classification which were prevalent from 01.07.2012 were continued from 01.07.2012 therefore, it cannot be said that there is no category of classification available and there cannot be two different criteria for classification of service, registration and payment of service tax and levy of service tax. Even ratio of clarifications issued by the CBIC and settled position of law in Para (supra) for the period prior to 01.07.2012 is equally applicable after 01.07.2012 for the purpose of classification of activities, etc. Even from 01.07.2012 as per Section 66F(3) subject to provisions of Sub-section (2),the taxability of bundled service shall be determined in the following manner namely,- (a) if various elements of such service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed service of transportation of goods in container by road only without handling of goods/cargo to the consignee or consignor as the case may be. The consignee/consignor were many times selecting the shipping lines from particular ports in Gujarat and shipping lines provided, services of sea transportation, handling of cargos at load port as well as discharge port. In the initial two years of period under dispute, the respondent provided services of transportation of goods by road/GTA from consignor's premises to load port and from dispatch port to consignee's port in certain cases only. Thus, the role of the respondent was limited to transportation of goods by road/GTA from consignor's premises to load port only, goods were unloaded at the consignee's premises by the consignee only therefore, in this fact the respondent had provided service of transport agency only prior to 01.07.2012 and also after 01.07.20102. 6.11 We find that there is no change in the definition of Goods Transport Service as well as levy and payment of service tax on service of GTA prior to 01.07.2012 and with effect from 01.07.2012 which is also discussed in the show cause notice. "Prior to 01.07.2012 " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gency which provides service in relation to transport of goods by road in a goods carriage shall issue a consignment note [to the recipient of Service]: Provided where any taxable service in relation to transport of goods by road in a goods carriage is wholly exempted under section 93 of the Act, the goods transport agency shall not be required to issue the consignment note. Explanation. - For the purposes of this rule and the second proviso to rule 4A, "consignment note" means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the names of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency." In the present case, respondent had not only raised consignment note, truck loading slip/Lorry Receipt bearing serial number, date, consignor's name, consignee's name, from to, back to, container number, name of transpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said rules. Only because of same containers were transported by sea in the vessel by other service provider and payment of sea transportation received by them against the invoice raised by them for reimbursement of actual basis, it cannot be said that it had not provided service of transport of goods by road. It is also not disputed that the respondent were registered as service provider under the category of Goods Transport Agency and paying service tax wherever payable by them under the Finance Act, 1994. In the registration, there is no mention of either cargo handling service or they had not provided any service of cargo handling nor transportation of goods by sea, etc. 6.14 We find that the respondent for providing services of Goods Transport Agency had raised invoice of the amount showing for road transportation and other on actual basis as reimbursement and also paid service tax wherever payable by them as GTA on the road transportation while providing services of transportation of goods by road. The respondent had also acted as pure agent of their service receiver for procuring service of sea transportation and handling of cargo at both the ports, etc, they had received in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as pure agent of the recipient of service; (iii) the recipient of service is liable to make payment to the third party; (iv) the recipient of service authorises the service provider to make payment on his behalf; (v) the recipient of service knows that the service for which payment has been made by the service provider shall be provided by the third party; (vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service; (vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and (viii) the services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the service he provides on his own account. Explanation 1.- For the purposes of sub-rule (2),"pure agent" means a person who- (a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service; (b) neither intends to hold nor holds any title to the services so pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for which payment has been made by the service provider shall be provided by the third party shipping line; (vi)The payment made by it on behalf of consignor or consignee was separately indicated in the invoices issued by them to consignor or consignee; (vii)It had recovered from consignor or consignee only such amount as has been paid by it to the shipping line; and (viii)The services procured by it from the third party as a pure agent of consignor or consignee were in addition to the services viz. goods transport agency provided by it on its own account. From the above, it is clear that the respondent had acted as a pure agent. As per the aforesaid meaning and fulfilling all the aforesaid conditions. The respondent also submitted that as per admitted fact in most of the cases the contracts were oral and as per provision of Section 10 of the Indian Contract Act, 1872 the contract can be written as well as oral also. In the instant case consignment note/invoice raised on the clients and payments received from the client. Based on such documents it clearly proves that there was contractual agreement between the respondent and their clients and for this very reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racter of the remuneration or commission, deserves to be included in the sum amount of remuneration/commission. 8. As per Rule 6(8) of Service Tax Rules, 1994, the gross amount referred to therein would apply to receipts of such sum, which would bear the character of remuneration or commission, in that, the said sum is brought under the head "receipts"." * SAI SHIPPING SERVICES - 2011 (22) STR 153 (Tri. Del.) "8. After appreciating the submissions made by both sides, we reproduce paras 2.4 and 2.5 from the Board Circular No. B/43/1/97- TRU dated 6-6-1997 :- "It is clarified that in relation to Custom House Agent, the service tax is to be computed only on the gross service charges, by whatever head/nomenclature, billed by the Custom House Agent to the client. It is informed that the practice obtaining is to show the charges for services as 'agency commission', charges, agency and attendance charges, agency charges and some similar descriptions. The service tax will be computed only with reference to such charges. In other words, payments made by CHA on behalf of the client, such as statutory levies (cess, customs duties, port dues, etc.) and various other reimbursable expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sea freight handling charges as discussed in paras (Supra) on behalf of the clients to the shipping line and reimbursement on actual basis is not under dispute. The respondent has not made any provision of service of transportation of goods by sea and handling of cargo at load port and discharge port. It is also a fact that no consideration for such service to whatever amount received by them was reimbursement of the actual amount paid to shipping line on behalf of the recipient of service. For the purpose of levy of service tax there must be a provision of service for consideration, once there is no provision of service and receipt of consideration there cannot be any levy of service tax for making a payment on behalf of the client and raising invoices. Respondent has simply arranged payment on behalf of service recipient i.e. Consignor or consignee to the shipping line and taken reimbursement on actual basis from the receiver of service hence, the same cannot be considered as provision of service on consideration basis. 6.18 As we opined in the above para that the respondent had provided service of Goods Transport Agency, the said service even continued to be defined as Goods T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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