By TIOL News Service

MUMBAI, APR 01, 2013: THE appellant are manufacturers of cement and the raw material is clinker, which is received by them by sea through ships. The said clinker is unloaded from the ships at the jetty and thereafter transported to their factory by availing services of transporters, namely, New Konkan Transport and M/s. Yashashree Transport.

Since the appellant did not discharge service tax liability under the category of GTA service a show cause notice dated 11/03/2010 was issued demanding service tax of Rs. 13,51,518/- along with interest.

In adjudication, the allegations in the SCN were confirmed and penalties were imposed u/s 76, 77 and 78 of the FA, 1994. The lower appellate authority upheld the demand and set aside the penalty imposed u/s 76 of the FA, 1994 while confirming the rest of the penalties.

The appellant is before the CESTAT and makes the following submissions -

+ Non-payment of ST was detected by the audit party during October, 2007 whereas the SCN has been issued only on 11/03/2010 and, therefore, the demand of service tax for the period prior to October, 2008 is time-barred, as extended period of time could not have been invoked by the Revenue when the audit party had already noticed the non-payment of service tax.

+ The service rendered is classifiable under ‘Cargo Handling Service' and, therefore, the demand of service tax under GTA is not sustainable.

+ Even if it is held to be classifiable within the category of GTA service, they will be entitled to benefit of Notification No. 34/2004-ST dated 03/12/2004 which exempts service tax if the transportation charges paid for a consignment is less than Rs. 750/-.

The Revenue representative made the following counter submissions -

+ Even though the audit was conducted in 2007 and the appellant was asked to furnish details, in spite of repeated reminders they submitted the details only in December 2009 and January, 2010 and, therefore, the issue of notice dated 11/03/2010 should be considered within time.

+ As regards the argument that the appellant is rendering ‘Cargo Handling Service', reference is made to the work order given by the appellant to the transporters which indicated that the order is for loading and transporting of clinkers; that the rate for loading is 40 paise per ton whereas transportation charges are Rs. 28.08 per ton. Thus, it is clear that transportation is the main activity and loading is only incidental or ancillary to the transportation work. Therefore, the demand of service tax under GTA service is correct in law.

+ With regards to the argument that the appellant is eligible for benefit of Notification No. 34/2004-ST, it is pointed out that the matter has been considered by the lower authorities and has been rejected on the ground that the said exemption applies to transporters who discharge the service tax liability and who carries a number of individual consignments and not to the appellant who pays service tax on GTA services as they have been deemed to be the person liable to pay service tax.

It was, therefore, submitted that the appellant should be put to terms.

The Bench observed -

“4.1 As regards the time-bar argument adopted by the appellant, it is seen from the show cause notice that the appellant did not inform at all the existence of the contract/work orders to the department and this information was suppressed form the department. Further, even thought the same was noticed during the audit, the appellant was asked to give details such as copies of the work orders, the amounts paid to the transporters and this information was submitted to the department only in December, 2009 and January 2010. In any case, demand for the period October 2008 to December 2009 is within the normal period of time. Further, time-bar is both a question of fact and question of law which can be considered only at the time of final disposal of the appeal.

4.2 As regards the contention of the appellant that the service rendered is ‘Cargo Handling' and not ‘transportation', we do not find any merit in this argument. The work order given by them to the transporters clearly indicates that it is for loading and transportation of clinkers and rate for transportation is far higher than that for loading. In any transportation, loading and unloading is incidental and, therefore, the predominant and essential nature of service is transportation and not ‘Cargo Handling'. Accordingly, we reject the contention of the appellant in this regard. Lastly, with respect to the benefit of Notification No. 34/2004-ST, the said Notification applies when the service tax liability is discharged by the transporters themselves and the transportation charges for the individual consignments is less than Rs. 750/-. In the present case, the agreement is not for transportation of individual consignments but for transportation of 90,000 tonnes of cargo over a period of time and thus, there is no individual consignment for transportation of which, the amount is paid. In view of this the appellant does not appear to be eligible for the benefit of the said notification.”

Holding that the appellant has not made out a case for complete waiver of the pre-deposit of the dues adjudged against them, the Bench directed the appellant to make a pre-deposit of 50% of the ST demand for obtaining a Stay.

(See 2013-TIOL-529-CESTAT-MUM)