ST - Transportation is most prominent element of composite contract - GTA classification cannot be faulted: CESTAT
By TIOL News Service
MUMBAI, OCT 09, 2017: M/s GRASIM Industries Limited entered into agreements with the appellant for transportation of coal from the premises of supplier to their factory at Nagda.
The appellant was to receive the consolidated consideration per ton as specified in the various contracts.
The appellant had been paying service tax on this consideration as provider of 'goods transport agency service' and discharging tax liability thereon after availing abatement of 75% afforded by notification no. 32/2004-ST.
The jurisdictional tax authorities took a view that the bonus received by the appellant had not been included in the assessable value and the appellant, thereafter, remitted Rs.77,84,080/-.
A SCN dated 22.10.2010 was issued for recovery of short-levy of tax of Rs.94,75,010/- on such receipts of bonus, the amount of Rs.77,84,080 for the period from 2006-07 to 2009-10 already remitted was sought to be appropriated, and for further recovery of Rs.4,47,88,078/- by re-classifying the activity as 'Clearing and forwarding agency service'.
The CCE, Nagpur confirmed the demand along with interest and penalties.
In appeal before the CESTAT, the appellant inter alia challenges the re-classification of services.
The Member(J) writing for the Bench made the following initial remarks -
"4. We find it mystifying that the notice has been issued for recovery of tax on abated value on the self-declared service and, on the same consideration, demanding the tax on the unabated value after re-classifying the service. Apparently, the notice issuing authority lacked confidence in being able to convince that the activity could, justifiably, be re-classified…"
After adverting to the apex court decision in Coal Handlers Pvt. Ltd - 2015-TIOL-101-SC-ST and extracting passages from the same, the Bench further observed -
"8. Thus, we are able to conclude that 'clearing and forwarding agent service' is one where a manufacturer or its representative engages such an entity to handle the place utility function in a commercial chain with the goods delivered to customers on instruction of that principal. Such a function can hardly be re-designed to describe the very reverse for delivery of procurements required by the principal.
9. It would appear that the tax authority in its anxiety to deny the abatement that is the entitlement of provider of 'goods transport agency service' sought to bring the activity under an omnibus head that being bereft of a specific definition could be resorted to for that purpose, failed to identify the various services that were elements of this composite contract. Some of those could possibly have been taxable services. Nevertheless, section 65A of Finance Act, 1994 lays down the principles that should guide classification of composite services. It would appear that transportation is the most prominent of these and the classification that was declared by the appellant cannot be faulted for its legality. More so, as the impugned order has failed to consider such an option. Nay, even the show cause notice is regrettably bereft of such a scrutiny. The activity of the appellant is not classifiable as 'clearing and forwarding agents service' and the demand on that head must fail."
As regards the demand of short-levy of tax of Rs.94,75,010/-, the Bench directed the original authority to ascertain whether the entire amount (as claimed) has been paid along with interest and to consider applicability of section 73(3) of the FA, 1994.
Conclusion:
+ Service is taxable as 'goods transport agency service' and the demand arising from re-classification of the service under 'clearing and forwarding agency' is set aside.
+ The remaining portion of the impugned order is remanded to the original authority to determine whether section 73(3) is applicable.
(See 2017-TIOL-3628-CESTAT-MUM)
