CESTAT, NEW DELHI BENCH: NO GTA SERVICES IF CUSTODIAL RIGHTS NOT TRANSFERRED TO TRANSPORTER (IN FAVOUR OF ASSESSEE)

In its judgment dated 21^st September, 2012 CESTAT, NEW DELHI BENCH, in the case of Birla Ready Mix vs. Commissioner of Central Excise held that transportation services provided by any operator doesn’t be deemed to be GTA service if custodial rights not transferred to transporter .

Issue for Consideration

The issue arises here is whether the transportation facility provided by the transporter will be Goods Transportation Agency (GTA) service liable to service tax.

Facts of the Case

• The appellant is engaged, in manufacturing of Read Mix Concrete (“RMC” for short).

• They had hired “Transits Mixers”, a vehicles specially designed for carryings RMC from place of manufacture to place of delivery of the goods.

• The vehicles were provided by the owners to the appellant for their use as per terms of a contract.

• The appellant paid consideration to the vehicle owners which involved certain payments on monthly basis and certain payments based on the number of kilometers run.

• Revenue demanded tax on the consideration paid by the appellant to the vehicle owners, considering it as a consideration for services of “Goods Transport Agency” received by the appellants since in the case of such services tax is to be paid by recipient of service.

• The counsel for the appellant submits that the transporting activity is done by the appellant themselves and was for delivering their product at the premises of the buyers.

• The counsel states that they were not issuing any consignment note and hence they could not be considered as “Good Transport Agency”.

• He contends that the activity of was one of giving vehicle on lease.

• Such services became taxable under the head for “supply of tangible goods” from 16-05-08 and therefore there cannot be any demand for service tax for the period prior to that.

• He further submits that the nature of activity involved in contracts of the same nature was before the Hon. High Court of Andhra Pradesh, in the case of G.S. Lamba & Sons v. State of A.P. [2012] 35 STT 248. In that case the State Sales Tax Department of the state of Andhra Pradesh was proposing to levy sales tax on the activity arguing that the activity amounted to transfer of right to use transit mixers. The party contested that the activity was one of providing services of transport. The High Court rejected the argument of that party in that case and decided that the activity amounted to transfer of right is use.

• The ld A.R. for Revenue submits that operators were responsible for delivering the goods to consignees and to get their acknowledgment. The operators maintained log books showing details of consignments, consignees etc. and such record is equivalent to consignment note.

Observation of CESTAT

Commissioner (Appeal) held that the transportation services provided by any operator doesn’t be deemed to be GTA service if custodial rights not transferred to transporter relying on the facts:-

•   Considering the terms of contract it is clear that the operator was responsible only for the vehicle and there are no custodial rights or responsibilities in matter of goods carried.The vehicle are to be painted as directed by the appellant and showing appellants logo.

•   The main responsibility of the supplier of vehicles is to ensure the availability of the vehicles in time and in proper condition.

•    The agreement does not demonstrate that the operator has any special rights or responsibility about the goods as in the case of goods entrusted to a “Goods Transport Agency”.

•   This obviates the need to issue consignment notes which normally is a document of title for the goods when it is in the custody of the transporter.

•   There is one clause to the effect that the operator will obtain proper receipts from customers after the goods are delivered.

•    Since the appellants are responsible for the goods transported, consignment note, which is a document of title to the goods, is not issued.

•   When consignment notes are not issued by the operator they cannot be considered as a “Goods Transport Agency”.

•     It is further noted that service tax is levied on the services of a “Goods Transport Agency” and not on services of a “Goods Transport Operator”.

•   The mere fact that the operator is doing activity of transportation cannot make the operator a “Goods Transport Agency”. So the operators in this case cannot be considered as “Goods Transport Agencies”. We are not in agreement with the argument of revenue that the log-book maintained by the operators should be considered as equivalent to consignment note. 

•   Further the similar issue is already examined by the Andhra Pradesh High Court in the case of G.S. Lamba & Sons (supra). The Court has held that this type of contract is one for transfer of right to use the vehicle rather than for providing service of transportation. We do not find any reason to take a different view while examining the present matter which is in the context of service tax levy.

Considering the above facts & case law CESTAT has decided that no service tax will be charged from the appellant.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

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