By TIOL News Service

NEW DELHI, SEPT 05, 2017: THE appellant is engaged in the business of transportation of commercial and household goods.

In case of transportation of commercial goods, the appellant receives such goods in packed condition from the customers and transports the same without involvement of any labour, packing material or other support services from its side. Since, the customers are mostly corporate companies, the service tax liability is discharged by those customers under reverse charge mechanism under the category of transport of goods by road service.

With regard to transportation of household goods, the appellant is engaged by corporate/Government organisations/other authorities for shifting of household goods of their employees or by the individuals themselves, wherein the appellant carry on the activity of transportation of such goods together with or without packing/unpacking/loading/unloading as per the requirement of the customers.

For this purpose, where the customers are individuals, the appellant pays service tax under the category of goods transport agency service, after availing the abatement of 75% in terms of Notification No. 13/2008-ST dated 01.03.2008.

Where the customers are corporate entities, the appellant does not pay any service tax and the tax liability in such cases are discharged by those customers under reverse charge mechanism.

For providing the above services, the appellant issues various documents namely, consignment fixed up receipt, collection advice, consignment note, invoice, money receipt etc. to its customers, showing inter alia , the details with regard to the services provided and the charges levied thereon.

The DGCEI conducted an investigation and concluded that the services provided by the appellant during the period from 16.05.2008 to 31.03.2011 are classifiable under ‘Cargo Handling Service', instead of ‘Transportation of Goods by Road Service', as claimed.

The Principal Commissioner of Service Tax, New Delhi upheld the allegations in the SCN and confirmed the Service Tax demand of Rs.21,97,73,596/- along with interest and penalties.

The appellant is before the CESTAT.

It is submitted that the essential character of the service provided remains only of transportation of goods from one location to another and other activities like loading, unloading, packing, unpacking etc. are incidental to the main activity of transportation and, therefore, is rightly classifiable under the GTA service. Reliance is placed on the Circular Nos. 104/7/2008-S.T ., dated 06.08.2008 and 186/5/2015-S.T ., dated 05.10.2015 and the decision in the case of Drolia Electrosteels PVT. Ltd. -  2016-TIOL-442-CESTAT-DEL  in support. It is further stated that due to inadvertence they had claimed abatement of service tax to the tune of Rs.14,10,083/- which was subsequently paid and appropriated in the impugned order.

The AR submitted that reliance placed on the Board Circulars are misplaced since transportation service is not the main service but only incidental to the main service, which is packing, loading, unloading and unpacking. Inasmuch as the services provided by the appellant should be classifiable under ‘Cargo Handling Service' as held by the adjudicating authority.

The Bench observed -

+ On examination of the said definition clause (of ‘Cargo Handling Service'), it reveals that if the primary objective is to provide the services of loading, unloading, packing or unpacking of goods and the service of transportation is only incidental to such main activities, then the service should fall under the scope and ambit of ‘Cargo Handling Service'.

+ On the contrary, if the main object is to transport the goods from one place to another and to accomplish such purpose, if other services are provided by the transporter, then the essential character should meet the criteria of transportation service and to be taxed under the GTA service, on fulfilment of condition of issuance of the consignment notes.

+ Since the controversy arose with regard to proper classification of service, i.e. whether to be classified under ‘GTA Service' or ‘Cargo Handling Service', recourse has to be made to the provisions of clause (b) of sub-section (2) of Section 65 A ibid , which mandates that in case of composite services consisting of a combination of different services, which cannot be classified in the specified manner, then the classification has to be made on the basis of their essential character.

+ The contractual relationship between the appellant and its customers are primarily confined to transportation of household and other goods from one place to the other. It is a matter of fact that the customers never approach the appellant only for loading, unloading, packing or unpacking of goods . Rather, the request comes only when they want to shift the goods from one place to other. Considering the sensitive nature of the goods being transported, the appellant also undertakes other activities of packing etc., if so desired by its customers, which are optional. Thus, the modus operandi adopted by the appellant transpires that the principal aim and objective is transportation of goods and providing of other services are incidental and ancillary to the main purpose of transportation .

Adverting to the Circulars relied upon by the appellant and which were simply brushed aside by the adjudicating authority (in the words of the Bench), the CESTAT further observed -

++ On careful examination of the contents of circular dated 06.08.2008 and 05.10.2015, it transpires that the clarifications furnished thereunder by the CBEC, the apex body, are in conformity with the provisions of Section 65 A ibid.

++ Law is well settled that the circular issued by the Board, either in its administrative or executive jurisdiction, are binding on the officers working under it, unless and until it is proved that the clarifications furnished are contrary to the statutory provisions or the law pronounced by the higher judicial forums.

Noting that the case law cited by the appellant of Drolia Electrosteels Pvt. Ltd. (supra) is squarely applicable to the facts of the present case, the Bench concluded that the services provided by the appellant will appropriately be classifiable under GTA service, instead of Cargo Handling Service as held by the adjudicating authority in the impugned order.

The appeal to the said extent was allowed.

Nonetheless, the Bench also held that since the appellant had wrongly claimed abatement and subsequently paid the service tax amount of Rs.14,10,083/-, confirmation and appropriation of such amount in the impugned order was proper and justified.

(See 2017-TIOL-3237-CESTAT-DEL)