2010-IST-242-CESTAT-BANG

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, BANGALORE

Appeal Nos.ST/651,652, 653, 691, 692/08 & ST/102/09

Arising out of Orders-in-Original No.08/2008-(Commr.) Dated:8.9.2008;
No.09/2008-(Commr.) Dated: 8.9.2008; No.11/2008-(Commr.) Dated:8.9.2008;
No.12/2008-(Commr.) Dated: 29.9.2008; No.13/2008-(Commr.) Dated: 29.9.2008 & No.19/2008-(Commr.) Dated: 24.11.2008
Passed by CCE&C, Belgaum

Date of Decision: 30.12.2009

M/s BELLARY IRON & ORES PVT LTD
M/s MSPL LTD
M/s RAMGAD MINERALS & MINING PVT LTD
M/s THE SANDUR MANGANESE & IRON ORES LTD

Vs

CCE, BELGAUM

Appellants Rep by: Mr K S Ravisankar, Mr N Anand and Mr M S Nagaraja, Advs.
Respondent Rep by: Ms Sudha Koka, SDR

CORAM: M V Ravindran, Member(J)
P Karthikeyan, Member(T)

Service Tax – Freight paid to truck owners for transportation of iron ore by road within the mining area not exigible to service tax under GTA service as service provided by truck owners is outside the ambit of GTA Service – Impugned orders confirming service tax demands under GTA service and levy of interest and penalties liable to be set aside

Definition of ‘road' – Contention that ‘road' as mentioned in Section 65(105)(zzp) refers only to ‘public road' not acceptable – Since demand of service tax is set aside, reasoning only of academic interest

Eligibility of Notification No. 34/04-ST – If an assessee incurs freight upto Rs. 1500/- per consignment, benefit of exemption Notification 34/2004-ST not available

Limitation – Non-payment of service tax on the said activity having noticed by audit party of department, demand cum show cause notice issued beyond one year hit by limitation

Appeals allowed

Case law referred:

MSPL Ltd vs. CCE, Belgaum (2008-TIOL-2137-CESTAT-BANG)

Bolani Ores vs. State of Orissa [AIR 1975 SC 15]

ETA Engineering Ltd., vs. CCE, Chennai (2004-TIOL-959-CESTAT-DEL-LB)

RK Transport vs. CCE, Raipur [2008 (12) STR 722 (Tri. Delhi )] = (2008-TIOL-1658-CESTAT-DEL)

UP State Sugar Corpn. vs. CCE, Meerut-II [2009 (14) STR 431 (Tri.-Del)]

Departmental Circular referred:

CBEC Circular No.232/2/2006-CX.4 dated 12.11.2007

FINAL ORDER NO.1535 TO 1540/2009

Per: P Karthikeyan:

These appeals filed by M/s. Bellary Iron Ores Pvt. Ltd (ST/651/08), M/s. MSPL Ltd. (ST/691/08, ST/692/08 & ST/652/08), M/s. Ramgad Minerals & Mining Pvt. Ltd. (ST/653/08) and M/s. The Sandur Manganese & Iron Ores Ltd. (ST/102/09). The common issue involved in all these appeals is whether the freight paid to owners and operators of trucks for transportation of goods by road is exigible to service tax under the head ‘Goods Transport Agency' service.

2. The order impugned in Appeal No.ST/651/08 filed by M/s. Bellary Iron Ores Pvt. Ltd (BIOL) confirmed the following liabilities against it.

(i) Service tax u/s 73(1) of the Finance Act 1994 (the Act): Rs.72,85,191/- and applicable interest.

(ii) Penalty u/s 76 of the Act : Rs.200/- per day.

(iii) Penalty u/s 77 of the Act : Rs.1000/-

(iv) Penalty u/s 78 of the Act : Rs.74,30,895/-

(v) Period of dispute : 01.01.2005 to 31.03.2006

3. In the orders impugned in the remaining appeals similar penalties have been imposed in addition to the demands of tax confirmed as per the following details.

A. Appeal No.ST/691/08 filed by M/s. MSPL Ltd., Unit-I.

Service Tax u/s 73(1) Act : Rs.469/- and applicable interest.

Period of dispute : 01.04.2006 to 31.03.2007

B. Appeal No.ST/692/08 filed by M/s. MSPL Ltd., Unit-II

Service tax u/s 73(1) of the Act : Rs.62,528/- and applicable interest.

Period of dispute : 01.04.2006 to 31.03.2007

C. Appeal No.ST/652/08 filed by M/s. MSPL Ltd., Unit-II

Service tax u/s 73(1) of the Act : Rs.7,37,422/- and applicable interest.

Period of dispute : 01.04.2006 to 31.03.2007

D. Appeal No.ST/653/08 filed by M/s. Ramgad Minerals & Mining Pvt. Ltd.

Service tax u/s 73(1) of the Act : Rs.2,51,634/- and applicable interest.

Period of dispute : 01.04.2006 to 31.03.2007

E. Appeal No.ST/102/09 filed by M/s. Sandur Manganese & Iron Ores Ltd.

Service tax u/s 73(1) of the Act : Rs.2,93,34,552/- and applicable interest.

Period of dispute : 01.01.2005 to 30.09.2007

4. As the order impugned in appeal No.ST/651/08 filed by BIOL covers most of the issues involved and possible arguments of the assessees, we take up appeal No.ST/651/08 for detailed examination. Facts of the case in the case of BIOL in brief are that the appellant had incurred freight for transportation of iron ore by trucks in private mines during 01.01.2005 to 31.03.2006 and did not pay service tax held to be due under the category Goods Transport Agency service (GTA) in respect of consignments carried by trucks owned/operated by commercial concerns. Vide the order impugned in this appeal, the Commissioner held that the tax under GTA was attracted in such cases. He allowed the appellants benefit of abatement of 75% under notification No.36/04-ST dated 03.12.2004 and exemption from tax in respect of consignments carried by the trucks when the freight paid per consignment was not above Rs.750/- each under notification No.34/04-ST dated 03.12.2004. In the other appeals, the goods transported were iron ore or mining products including waste products within the mining area. In these cases also demands were raised on similar grounds and exemption under the two notifications similarly allowed, except in the case of M/s. The Sandur Manganese & Iron Ore Ltd (ST/102/09) wherein the appellants were not allowed abatement of 75% of the tax for the appellant failing to produce consignment notes with the declaration in respect of each consignment as per the notification No.36/04-ST or its successor notification No.01/06-ST and the relevant Circular of CBEC.

5. BIOL has raised the following grounds in the appeal.

a) The owners of trucks were not Goods Transport Agency or Transport booking agents rendering service in relation to transportation of iron ore by road in a goods carriage as defined under Section 65 (50b) of the Act and taxable service defined under Section 65 (105) (zzp) of the Act (since 01.05.2006).

b) Movement of iron ore within the mine during the processing or production of iron ore products was not by “road” as was commonly understood and hence such movements did not come with in the scope of service of GTA.

c) In terms of CBEC Circular No.232/2/2006-CX.4 dated 12.11.2007 the activity of handling and transportation of iron ore within the mine and transportation outside the mines were liable to service tax under “cargo handling service” and goods transport by road. The handling of export cargo was excluded from the purview of “cargo handling service” in terms of its definition under Section 65 (23) of the Act.

d) The supply of trucks by the owners with out transferring legal right of possession and effective control was a taxable service under the head “supply of tangible goods” as defined under Section 65 (105) (zzzzj) of the Act effective from 16.05.2008 and that the service provider was liable to pay service tax (under that head).

e) The amounts paid to the lorry owners were much less than Rs.1500/- per trip and hence came with in the exemption limit prescribed under clause (i) of Notification No.34/2004-ST dated 03.12.2004 and no service tax was payable.

f) The actual amounts paid to the lorry owners for the service during the period from 01.01.2005 to 31.01.2005 was Rs.3,02,74,385/- and not Rs.7,70,61,270/- and hence the value of taxable service adopted was erroneous.

g) The Department had audited the records/returns/documents in February 2006 and noticed that the assessee had not paid service tax on payments made to the lorry owners for the period from 1/2005 to 1/2006 as brought out in the Show Cause Notice. Therefore, there was no suppression of facts and the demand initiated through the notice issued on 24.05.2007 was substantially barred by limitation.

h) Penalties under Section 76 Section 77 and Section 78 were not sustainable in view of Section 80 of the Act when the issue related to classification of service; the impugned order was contrary to the instructions of the CBEC clarifying that handling and transportation of minerals within the mine was covered under “cargo handling service” and the export goods were admittedly excluded from its purview.

i) The Commissioner had found that BIOL had undertaken transportation at least either as proprietary or partnership or HUF. He concluded that the contention that owners of trucks were GTA could not be accepted and that the services provided by the transporters were in the capacity of commercial concern. The concern/firms had rendered services of Goods Transport Agency. The notice had proceeded on the premise that transporters were actually owners of vehicles. The assessee thus did not need to prove the same fact any further. The main issue was whether “owners” of vehicles having providing the service of transportation came within the scope of “Goods Transport Agency”.

Section 65 (105) (zzp) of the Finance Act, 1994 defined taxable service provided by a GTA as under:

(zzp) to a customer, by a goods transport agency, in relation to transport of goods by road in a goods carriage ;

The term “Goods Transport Agency” is defined under Section 65 (50b) of the Act as under:

(50b) ‘goods transport agency' means any (commercial concern)* who provides service in relation to transport of goods by road and issues consignment note, by whatever name called; (* substituted by the word ‘person' from 01.05.2006)

j) The definition of Goods Transport Agency and taxable service provided by a GTA made it clear that only the services of an agency providing services in relation to transportation of goods by road were liable to service tax. It was clear that mere transportation of goods by road per se was not taxable service.

k) The incidence of service tax was not on transportation of goods by road per se, but on the service of GTA “in relation to “ transportation of goods by road in a goods carriage as defined under Section 65 (105) (zzp) of the Act. Transportation of goods by truck owners/transporters without engagement/involvement of Transport Booking Agent or Goods Transport Agency was not liable to service tax.

l) The “owner” of the goods carriage could not be said to be “goods transport agent” of the owner. The taxable service of GTA under Section 65(105)(zzp) “is to a customer, by a goods transport agency, in relation to transportation of goods in a goods carriage”. Accordingly, the same person could not be “owner” of the goods carriage as well as his own “agent”.

m) On 08.07.2004, the Hon'ble Union Minister of Finance while presenting the Union Finance Bill 2004-05 had categorically stated in Para 149 that there was no intention to levy service tax on truck owners or truck operators. The same issue was earlier examined by the Tribunal in the case of MSPL Ltd Vs. CCE, Belgaum [2009(13) STR 554 (T)] = (2008-TIOL-2137-CESTAT-BANG). The Tribunal had held, “From the above, it is clear that the legislative intent is to tax only the services provided by a Goods Transport Agent to a customer and not the owner”. The Department accepted the judgment and not challenged the same.

n) Section 65 (105) (zzp) defined taxable service as “to a customer, by a goods transport agency, in relation to transport of goods by road in a goods carriage”. The appellants therefore, submit that in order to come within the scope of taxable service of GTA, there must be “transportation of goods by road in a goods carriage”. There was no “road” as was commonly understood in iron ore mines. The tracks or paths in the mines were a result of mining and movement of vehicles and earth moving machines in the course of mining. The tracks inside the private mines were not public roads. The term ‘ROAD' as used in the context of the service of the GTA meant services in relation to transportation of goods by “ PUBLIC ROAD ”. ‘ROAD' meant any road, street, square, Court, alley or passage, whether a thoroughfare or not, over which the public have a right of way. Ben. Act III of 1884 (Municipal)S.6 Cl.13. The Honourable Supreme court in the case of Bolani Ores Vs. State of Orissa [AIR 1975 SC 15] while examining whether dumpers, rockers and tractors were motor vehicles within the meaning of the relevant Bihar and Orissa Motor Vehicles Taxation Act (2 of 1930) it was held that having regard to the context of the definition of “public place” in Section 2(24) of the Indian Motor Vehicles Act, the regulatory character of that act, and the use of the word “road” used in a public act, road would mean a “public road”. The Commissioner had not recorded any findings on this plea of BIOL. The reference to ‘transport of goods by road in a goods carriage' in Section 65 (50b) and Section 65 (105) (zzp) of the Act was thus to transport of goods by “public road” in a goods carriage. The transportation of goods within the private mines, where there were no roads, was not a taxable service under the classification of GTA.

o) The truck owners, not being GTA had hired their trucks for use for transportation of iron ores with in the mining area. The transaction was of hiring of trucks with out transferring the right of possession and control over the trucks. The activity of supply of trucks with out transferring right of possession and effective control was a service of ”supply of tangible goods”.

Section 65 (105) (zzzzj) of the Act defined the taxable service as under:

(zzzzj) to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances.

Notification No.29/2008-ST dated 26.06.2008 exempted the taxable service of supply of goods carriage without transferring the possession and effective control of such goods as referred to in sub-clause (zzzzj) of clause (105) of Section 65 provided by any person to a Goods Transport Agency for use by the said GTA to provide any service as referred to in Section 65 (105) (zzp) to a customer in relation to transportation of goods by road in the said goods carriage from the whole of service tax. Notification thus clearly brought out the distinction between the “owner” of the vehicles and “goods transport agency”, and the service of “supply of vehicle” for use and “service of GTA in relation to” transportation of goods by road in a goods carriage were independent services.

p) Exemption under Notification No.34/2004 dated 03.12.2004:

i) It is argued that in case they were held liable to pay service tax under GTA, the appellants were eligible for exemption on freight charges upto Rs.1500/- per truck/per trip under Notification No.34/2004-ST dated 03.12.2004. The Commissioner had recorded the finding that the assessee was entitled for full exemption where the gross amount paid had not exceeded Rs.750/-.

ii) A plain reading of Notification No.34/2004-ST dated 03.12.2004 showed that there were two separate exemptions. The first exemption under clause (i) was when the gross amount charged on consignments transported in a goods carriage did not exceed Rs.1500/-. The second exemption under clause (ii) was when the gross amount charged on an individual consignment transported in a goods carriage did not exceed Rs.750/-. The expression “an individual consignment” appeared in the case of second exemption under clause (ii) of the notification. The notification contained an Explanation for “an individual consignment”. The explanation stated that an “individual consignment” meant all goods transported by a GTA by road in a goods carriage for a consignee. It is argued that when the gross amount charged on the consignments transported in a goods carriage did not exceed Rs.1500/- the assessee was eligible for exemption under clause (i). The assessee came within the plain language of exemption under clause (i). Therefore, the assessee was eligible for exemption on freight charges paid up to Rs.1500/- per trip/truck load of iron ore transported. Clause (ii) would apply only when there were a number of consignments for multiple consignees. The explanation for the expression “individual consignment” appearing in clause (ii) of the notification was not applicable where exemption for freight charges upto Rs.1500/- was available under clause (i). In case the Department's contention was to be accepted, then the exemption of freight charges upto Rs.1500/- under clause (i) would never be available when goods were consigned to a consignee. That could not have been intention of the Government. The notification required both strict and purposive interpretation so that the benefit intended was extended.

q) The Appellants had submitted that Para 5 of the SCN had shown the freight charges of Rs.7,70,61,270/- as paid to the lorry owners during the period from 01.01.2005 to 31.01.2005 based on the statement of Sri. A. Raghavendra. The Appellants had submitted that the freight charges of Rs.2,15,15,784/- paid in January, 2005 were for hiring of lorries for the period prior to 01.01.2005, during which period there was no levy of service tax, an amount of Rs.2,17,60,451/- had been paid to the CHA on which service tax had already been paid and the amount of Rs.35,10,650/- had been paid to the GTA (other than lorry owners) which had already suffered service tax. The appellants submitted that the actual amounts paid to the lorry owners for the service during the period from 01.01.2005 to 31.01.2005 was Rs.3,02,74,385/-.

r) The SCN issued on 24.05.2007 proposed to demand service tax on freight charges paid to truck owners or operators during the period from 01.01.2005 to 31.03.2006. The notice stated that the Audit Party of the department while conducting the audit of the assessee's records during February 2006 had noticed that for payment of service tax for the period from 1/05 to 1/06, the assessee had excluded payments made to the lorry owners from the gross value of taxable service for calculating the service tax in respect of the service of GTA. The audit objection had been communicated to the assessee and that the assessee in their reply dated 15.05.2006 had informed the jurisdictional Superintendent, Bellary that the individual lorry owners to whom the freight charges had been paid were not “Goods Transport Agency”, the ‘GTA' referred to transport booking agents which provided services in relation to transport of goods by road and not the truck owners. The department thus had the knowledge of the transactions in February 2006 and the knowledge of the bonafide grounds on which the assessee had not paid service tax in May, 2006. There was therefore, no justification for the department to allege suppression of fact with intention to evade payment of service tax and issue notice on 24.05.2007. Thus, the entire demand was barred by limitation.

s) Service tax paid was available as CENVAT credit to the assessee itself since the assessee was exporting iron ore classifiable under CH 26.01 of the Central Excise Tariff act, 1985. Since, the appellants exported excisable goods, they were eligible for CENVAT credit of service tax paid on input services. Since the appellants were not paying excise duty on goods or service tax on any out put service, the appellants were eligible for refund of unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004.

t) The Appellants had paid service tax on the services of GTA for inward and outward transportation of goods. They had not included the value of transportation within the mine in the total value of service of GTA. The taxability and classification of service of transportation of iron ores within the mine area was a matter of interpretation of law. The CBEC Circular dated 12.11.2007 had classified the said activity with in the mine area as coming under “cargo handling service”, which excluded export goods and the Commissioner, contrary to the instructions of the Board had classified the same under GTA. The Larger Bench of the Tribunal in the case of ETA Engineering Ltd., Vs. CCE, Chennai – 2006 (3) STR 429 (T-LB)= (2004-TIOL-959-CESTAT-DEL-LB) had held that when there was bonafide doubt as to taxability of service, there was reasonable cause for not depositing service tax and that penalties were not imposable in view of Section 80 of the Act. It is submitted that the penalties imposed under Section 76, Section 77 and Section 78 were required to be set aside by invoking Section 80 of the Finance Act, 1994.

6. Revenue has submitted that as per Notification No.34/2004-ST dated 03.12.2004, the onus of paying service tax on GTA service was on the appellant who was a service receiver liable to pay the tax on the subject service. The question as to whether the truck owners/transporter was a agency or not as defined in Section 65(50b) of Finance Act, 1994 arose only when the onus of payment of service tax was on the transporter himself. Only then, came the question of identifying as to whether the transporter was an agency issuing consignment notes etc. In the instant case, the freight was paid by the appellant and as per the said notification; they were liable to discharge service tax liability on GTA service. Further, it was common understanding that a lorry/truck carrying iron ore plied only on roads.

6.1. The CBEC Circular No.232/2/2006-CX.4 dated 12.11.2007 stated that the activities were chargeable to tax either under ‘cargo handling service' or ‘goods transport by road' service. Further the circular clarified that if the transportation was undertaken by mechanical systems such as conveyors, rope system, merry go rounds, then only the service tax was chargeable under ‘cargo handling service'. In other words, the goods if transported by road/by truck, then they were chargeable under ‘goods transport by road' service.

6.2. A truck load of iron ore was an individual consignment and as per Notification No.34/2004-ST dated 03.12.2004, the exemption available was only when each freight amount was less than Rs.750/-. Appellant had not provided any reason to show that they were not individual consignments.

6.3. ‘Supply of tangible goods service' came into effect from 16.05.2008. However, the services received/rendered by the appellant were much before 16.05.2008. When the exact service GTA service had been listed in the Act prior to 16.05.2008, the question of fitting the service elsewhere did not arise.

6.4. The ld SDR cited the following case laws in support of the impugned order.

1. MSPL Ltd Vs. CCX Belgaum–2009 (13) STR 554 = (2008-TIOL-2137-CESTAT-BANG) - the liability to pay ST is clearly on the person paying the freight.

2. RK Transport Vs. CCE, Raipur 2008 (12) STR 722 (Tri. Delhi )= (2008-TIOL-1658-CESTAT-DEL) – Transportation is an activity independent of mining activity (may not be treated as part of mining activity)

3. UP State Sugar Corpn. Vs. CCE, Meerut-II [2009(14) STR 431 (Tri.Del) – service tax stands demanded on the appellant as a recipient of GTA services.

7. We have carefully studied the case records and considered the rival submissions. The dispute involved in this case is mainly whether transportation of goods by road using a goods carriage by an owner of the goods carriage is exigible under the category GTA. The impugned demands are raised and penalties imposed on the basis that the services involved are correctly classifiable under the head GTA. That the services were not exigible to service tax during the material period is also canvassed on the basis that the activity involved was “supply of tangible goods” brought under tax net vide Section 65 (105) (zzzzj) of the Act w.e.f. 16.05.2008. Therefore, the same activity was not taxable under another entry prior to that date. The appellants also argued that the demand was barred by limitation for the reason that the internal audit party of the department had visited the appellants and scrutinized their records in February, 2006; they had noticed that the appellants had not paid service tax on payments made to the lorry owners for the period from 1/05 to 1/06, the period of dispute. Therefore, suppression of facts could not have been validly invoked in the show cause notice issued on 24/05/2007 to confirm demand for a period beyond normal period. It is also submitted that even if the impugned activity involved constituted GTA service, the same was exempt under Notification No.34/04-ST dt. 03.12.2004 since the amount paid per trip per truck was less than Rs.1500/- in case of all consignments. Yet another argument raised is that the transportation carried out for the appellants had taken place within the mine and was not by road. The word ‘road' figuring in the Section 65(105) (zzp) of the Act had to be understood as referring to public road. In the instant case, therefore, the transportation by mud roads formed in the mining area could not be held to be transportation by road, which alone was taxable service under GTA.

8. It is seen from the show cause notice that the appellants had availed the service of transportation of goods from owners of lorries during the period of dispute. The Commissioner went to pains to establish that the impugned service had been rendered by a commercial concern and therefore constituted taxable service under GTA. We find that the activity subject to tax under the entry GTA was clarified by the Hon'ble Finance Minister in his budget speech (Clause-149 of the Finance Bill, 2004-05) wherein he stated as follows : “I may clarify that there is no intention to levy service tax on truck owners or truck operators”. It is obvious from this statement of the Union Finance Minister that the legislative intention behind the particular levy was not to tax truck owners or truck operators. We also find that this Tribunal in the case of MSPL Ltd. Vs. CCE, Belgaum [2009(13) STR 554 (Tri. Bang.)] = (2008-TIOL-2137-CESTAT-BANG) had held to the same effect. Hence, the impugned demand of service tax fails.

9. The appellants had relied on a judgment of the Apex Court in the case of Bolani Ores Vs. State of Orissa [AIR 1975 SC 15] wherein their lordships had examined the scope of the word ‘road' appearing in the Motor Vehicles Act and held as follows :-

“27……….The words “public place” has been defined in Section 2(24) as meaning “a road, street, way or other place whether a thoroughfare or not, to which the public have a right of access”. If the public have no right of access to any place which is not a road, street, way or thoroughfare it will not be a public place……….”

10. We find that in the above judgment, their lordships interpreted provisions of Indian Motor Vehicles Taxation Act. The Apex Court held that the expression ‘road' appearing in a regulatory act like the one they had considered, could connote only a public road in view of the definition to ‘public place' appearing in that act. We find that the ratio of the said judgment rendered when the Apex Court examined provisions of Bihar and Orissa Motor Vehicles Taxation Act does not apply to read the provisions of Finance Act, 1994. We reject this plea of BIOL.

11. BIOL advanced arguments in support of their claim relying on the entry “supply tangible goods” at (zzzj) of clause (105) of Section 65 and exemption Notification No.29/2008-ST dt. 26/06/2008. This notification reads as follows:

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of supply of a goods carriage, without transferring right of possession and effective control of such goods carriage, referred to in sub-clause (zzzzj) of clause (105) of section 65 of the Finance Act, provided by any person to a goods transport agency for use by the said goods transport agency to provide any service, referred to in sub-clause (zzp) of clause (105) of section 65 of the Finance Act, to a customer in relation to transport of goods by road in the said goods carriage, from the whole of the service tax leviable thereon under section 66 of the Finance Act.

From the above, we find that the notification exempts the taxable service of supply of goods carriage provided by any person to GTA for use by the said GTA to provide any service referred to in sub-clause (zzzzj) of clause (105) of section 65 of the Finance Act '94 to a customer in relation to transport of goods by road in the said goods carriage. It is thus abundantly clear that the GTA of entry (zzp) of clause (105) of Section 65 operates goods carriage not owned by it. GTA is a transport company undertaking not merely transportation. Therefore, the impugned activity rendered by truck owners is necessarily outside the ambit of the entry GTA.

12. As regards exemption extended under Notification No.34/2004-ST dated 03.12.2004, the Commissioner held that the consignments meant for the same consignee could not be split up so as to keep the freight amount for each bundle or packet with in the limit of Rs.750/- while the aggregate exceeded Rs.750/-. In order to avoid such splitting of consignments to the same consignee, the exemption under clause (ii) would apply when there was transportation of multiple consignments to multiple consignees. The explanation for “individual consignment” would then come into play, and the exemption would be restricted to freight charges upto Rs.750/- for transportation of individual consignment. The exemption would be available in the case of consignments transported in the same goods carriage and meant for the same consignee only if the aggregate freight in respect of such consignments is Rs.750/- or below. He held that BIOL were entitled for exemption in cases where gross amount paid on individual consignments transported in a goods carriage did not exceed Rs.750/- only and not in cases where gross amount paid on consignments transported in a goods carriage was upto Rs.1500/- as contended by BIOL. He held BIOL liable to pay service tax on the freight amount paid in all cases where the gross amount charged/paid on an individual consignment transported in a goods carriage exceeded Rs.750/-. BIOL has argued that the notification extended two types of exemption under the clauses (i) and (ii). It is argued that BIOL was eligible for exemption when the goods carriage transported only a single consignment belonging to BIOL and freight paid was upto Rs.1500/-. The explanation for the expression “individual consignment” appearing in clause (ii) of the notification was not applicable for exemption under clause (i) where freight charged was upto Rs.1500/-. Let us examine the exemption under this notification.

Notification No.34/2004 dated 03.12.2004 is reproduced below:

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided by a goods transport agency to a customer, in relation to transport of goods by road in a goods carriage, from the whole of service tax leviable thereon under section 66 of the said Act, where,-

(i)  the gross amount charged on consignments transported in a goods carriage does not exceed rupees one thousand five hundred; or

(ii) the gross amount charged on an individual consignment transported in a goods carriage does not exceed rupees seven hundred fifty.

Explanation .- For the purposes of this notification, “an individual consignment” means all goods transported by a goods transport agency by road in a goods carriage for a consignee.  

2. This notification shall come into force on the first day of January, 2005.

Notification No.34/2004 grants full exemption from service tax in the following two situations:

(i)  the gross amount charged on consignments transported in a goods carriage does not exceed rupees one thousand five hundred; or

(ii) the gross amount charged on an individual consignment transported in a goods carriage does not exceed rupees seven hundred fifty.

12.1. In view of the clear language of the explanation to ‘individual consignment' used in the notification, the exemption is obviously admissible to goods of transported as a single consignment for which the freight charged is not above Rs.750/-. Where the goods carriage transports several consignments, the exemption will be available if the aggregate freight charged for the trip does not exceed Rs.1500/-. Therefore, where an assessee incurred freight upto Rs.1500/- per consignment the assessee is not eligible for exemption. We uphold this reading of the notification by the Commissioner.

13. In the circumstances, we hold that the impugned transactions, where the appellant availed service of transportation by goods carriages not operated by GTA as per our discussion are not liable to tax under the head Goods Transport Agency service. It is also pertinent to note that the show cause notice basic to the demand had been raised beyond the normal period as the authorities had been aware of the details of the impugned transactions as early as in February, 2006 when the Audit party visited the assessee and since the show cause notice was issued on 24.05.2007. There is no dispute that the appellants discharged service tax on freight incurred where the goods had been transported availing the service of GTA during the material period. As the demand of service tax fails, the demand for interest and the case for penalties do not survive. Accordingly, we set aside the impugned order and allow the appeal filed by BIOL.

14. As regards remaining appeals, namely, ST/652, 653, 691, 692/08 & St/102/09, the impugned demands were raised on freight charges paid to truck owners in internal movement of iron products within the mine area and for development of mine by lifting the waste materials in hired trucks. In these cases also transportation was undertaken along the mud tracks of private mines by truck owners. Whether they were commercial concerns or otherwise, the activity involved did not constitute GTA service in view of our findings under appeal No.ST/651/08 of BIOL. The claim for benefit under Notification No.36/04-ST denied to M/s. The Sandur Manganese & Iron Ores Ltd., (ST/102/09) and the scope of exemption under Notification No.34/04 become academic. In the circumstances, we set aside the orders impugned in these appeals and allow these appeals.

[Pronounced in court on 30.12.2009]

(DISCLAIMER: Though all efforts have been made to reproduce the order correctly but the access and circulation is subject to the condition that Indiaservicetax.com is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.)