Brief Facts of the Case s10
2 OIO No. 44/STC/AHD/ADC(JSN)2012-13
BRIEF FACTS OF THE CASE
M/s. Food Corporation of India having their District office at Industry House, B/h Natraj Cinema, Ashram Road, Ahmedabad-380009 (hereinafter referred to as “M/s FCI ”or “the said assessee”) is a corporation established under Food Corporations Act,1964. As per Rule 2 (d) (v) of the Service Tax Rules, 1994, the liability to pay the service tax has been transferred to certain categories of service recipients in Goods Transport Agency Service. The said assessee, being a recipient of Goods Transport Agency Service specified under Rule 2(1)(d)(v) of the Service Tax Rules, 1994, are holding Service Tax Registration and they are required to comply with the provisions of the Finance Act, 1994 and the rules framed there under. M/s FCI is accordingly registered as “District Manager Food Corporation of India” with Service tax under the category of “Goods Transport Agency ”, as defined under Section 65 of the Finance Act 1994, as amended, bearing registration No. AHMFO0119AST001.
2. On the basis of Intelligence received. It was revealed that in respect of transportation services provided by the contractors with regard to the transportation of the food grain stocks, M/s FCI was paying Service tax on 25% value of the said transportation charges ( upon availing abatement of 75%) after availing the benefit of Notification No. 34/2004-ST dtd. 3.12.2004. However , M/s FCI was paying Service Tax only on the transportation charges and neither they nor other agencies make payment of Service Tax on Handling charges consisting of labour/loading and unloading charges even if the services of transportation as well as handling are provided by the same contractor.
3. In furtherance of inquiry, relevant documents were called for from M/s FCI. The Area Manager, FCI, District office, Ahmedabad vide his letter No. 40/ST/FCI DO,A’BAD/2010-2011 dtd. 19.8.2011 informed that there was no addition of handling charges consisting of labour loading and unloading charges in the transport charges. He further stated that the transport charges and other handling charges like loading, unloading weighment, salvaging of foodgrains, providing casual labours etc are being governed as per the defined schedule of rates provided in the contract of Handling and Transport contract.
3.1 He also enclosed the copies of contract of Handling and Transport contract and Bills of transporters who provided the transport service as well as other handling charges like loading, unloading weighment, salvaging of foodgrains, providing casual labours etc.
4. On scrutiny of the copies of Bills of transporters received from M/s FCI, it was found that majority of them were not legible and were having overwriting of payment details. Hence M/s FCI was requested to provide the data in a given format vide letter dtd. 12.10.2011. The said data was submitted by the Area Manager , District Office, FCI, Ahmedabad vide letter No. Fin/40/ST/FCIDOA’bad/10-11 dtd. 14.3.2012. It has been informed that they have not availed the benefit of Notif No. 34/2004 –ST dtd. 3.12.2004. On going through the data it appeared that FCI had calculated their Service Tax liability only on the basis of transport charge shown in the Bill of transporters and not taken into consideration the charges like loading, unloading, salvaging of foodgrains, providing casual labours etc even though all these services had been provided by the same contractor and charged in a same bill .
5. Attention is drawn to the Board’s Circular No. 104/7/2008-S.T., dated 6-8-2008 vide F.No. 137/175/2007-CX.4 wherein it had been clarified that if any ancillary/ intermediate service is provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the GTA, and not by any other person, such service would form part of GTA service
6. Further, it appeared that as per the tender for Handling and transport contract , the transporters have provided transport services along with other services like pailing/loading, unloading, stacking, labour etc and have issued bills to M/s FCI wherein these charges have been shown separately in addition to the transport charges shown in the same Bill. However, M/s FCI had calculated the Service Tax on transport charges only and had not taken into account other charges like pailing/loading, unloading, stacking, labour etc. for the purpose of arriving at the taxable value which appear to be ancillary/ intermediate service provided in relation to transportation of goods as per the CBEC Board’s clarification cited above. A work sheet in the form of Annexure-A was prepared on the basis of data pertaining to such ancillary/ intermediate services in relation to transportation of goods provided by m/s FCI for the period 1.10.2006 to 26.2.2010. As the Service Tax on transport of food grains became exempted w.e.f 27.2.2010 vide Notification No.04/2010-Service Tax dtd. 27.2.2010, the taxable value for the year 2009-10 has to be considered upto 26.2.2010.
7. The yearwise summary of the Annexure-A is as under :-
Year / Taxable value after 75% abatement / Total Service Tax payable2006-07 ( 1.10.2006 to 31.3.2007) / 763366 / 93436
2007-08 / 1422037 / 175425
2008-09 / 4008010 / 490846
2009-10 ( upto 26.2.2010) / 1813142 / 186754
G.TOTAL / 80,06,555 / 9,46,461
8. In view of the above, M/s FCI appeared to have provided services under the category of “Transport of goods by Road” wherein the value of such ancillary/ intermediate services in relation to transportation of goods after extending the benefit of Notif No. 33/2004 –ST dtd. 3.12.2004 came to 80,06,555/- and have failed to discharge Service Tax amounting to Rs. 9,46,461/- including Ed. Cess and Sec. and Higher Ed. Cess on such taxable value.
9. Section 68 of the Finance Act, 1994 provides that every person providing taxable service to any person shall pay service tax at the specified rates and in such manner and within such period as may be prescribed. Further, Rule 6 of the service tax rule, 1994 stipulates that service tax shall be paid to the credit of the Central Government, by the 5th of the month immediately following the calendar month, in which the payments are received, towards the value of taxable services. FCI have not declared the income on account of services provided by them under the category of “Transport of goods by Road ” and have not discharged any Service Tax on the said services. They have therefore contravened the provisions of the said section as they have failed to make the payment of service tax amounting to Rs 9,46,461/- including Ed. Cess and Sec. and Higher Ed. Cess as explained in foregoing para for the services provided during the period 1.10.2006 to 26.2.2010 the credit of the Government within stipulated time limit. It further appeared that FCI had not taken into account such ancillary/ intermediate services in relation to transportation of goods for the purpose of arriving at the taxable value and discharging their service Tax liability and the same had neither been disclosed by them before the above inquiry nor reflected in the ST-3 returns filed by them from time to time . Thus, it appeared that M/s FCI had made short payment of Service Tax on “ Transport of Goods by Road” service as defined under section 65 (50b) of the Finance Act, 1944 as amended, read with section 65(105) (zzp) of the Finance Act 1994 by suppressing the total taxable value.
10. The above act of contravention on the part of M/s FCI appeared to have been committed by way of suppression of facts with an intent to evade payment of service tax and, therefore, the said service tax not paid/short paid was required to be demanded and recovered from them under proviso to Section 73(1) of the Finance Act,1994 by invoking extended period of five years. The act of contravention of the provisions of Section 68 of the Finance Act,1994 read with Rule 6 of Service Tax Rules,1994 appeared to be punishable under the provisions of Section 76 and Section 78 of the Finance Act,1994 as amended from time to time.
11. M/s FCI was also liable to pay interest at the appropriate rates for the period from due date of payment of Service Tax till the date of actual payment as per the provisions of Section 75 of the Finance Act, 1994.
12. Therefore, District Manager ,M/s. Food Corporation of India having their District office at Industry House, B/h Natraj Cinema, Ashram Road, Ahmedabad-380009 was called upon to show cause to the Additional Commissioner of Service Tax, having his office 1ST floor, Central Excise Bhavan, Near Polytechnic , Ambawadi, Ahmedabad-380015, vide Show Cause Notice No. STC/4-111/ADC/O&A/D-II/11-12 dated 10.04.2012 as to why –
i the services rendered by M/s FCI on which no service tax has been paid, should not be considered as “taxable service” under the category of “Goods Transport Agency” as defined under Section 65(50b) of the Finance Act 1994, as amended, read with Section 65(105) (zzp) of the Finance Act, 1994 and the value of services amounting to Rs. 80,06,555/- ( after abatement of 75%) received for providing services of “Goods Transport Agency” during the period 1.10.2006 to 26.2.2010 should not be considered as taxable value under Section 67 of the Finance Act, 1994 as shown in Annexure-A to this notice;
ii. the Service Tax (including Education Cess and Higher & Secondary Education Cess) amounting to Rs. 9,46,461/- (Rs. Nine Lakhs, forty six thousand four hundred sixty one only) on the value as shown in sr. no. i above on “Goods Transport Agency” service should not be charged and recovered from them under proviso to Section 73(1) of the Finance Act, 1994, as amended as shown in Annexure-A to this notice;
iii. interest at the applicable rate should not be charged on the Service Tax amounting to Rs. 9,46,461/- from the due date of payment of service tax to the actual date of payment under the provisions of Section 75 of the Finance Act, 1994, as amended;
iv. penalty under the provisions of Section 76 of the Finance Act, 1994, as amended, should not be imposed on them for failure to pay Service Tax, Education Cess and Secondary & Higher Education Cess as mentioned hereinabove within stipulated time;and
v. penalty under Section 78 of the Finance Act, 1994, as amended, should not be imposed on them for suppressing the full value of such taxable services and material facts before the department resulting into non-payment of Service Tax, Education Cess and Secondary & Higher Education Cess as mentioned herein above.
DEFENCE REPLY
13. M/s FCI filed their written reply dated 28.06.2012 wherein they submitted that they were paying service tax on 25% of the gross amount charged by goods transport agency, from corporation at the rate applicable under service tax act ( Not. No. 32/2004) ; that as per the demand they have already paid and shown in Service Tax return ST3, however Rs. 9,46,461/- had been charged upon them after a lapse of 6 years; that recovery of the same from the party is not possible.
14. Previously , before the issue of the SCN, on a query by the Preventive Section, Service Tax, Ahmedabad, M/S FCI submitted vide letter dated 19.08.2011, that there was no addition of handling charges consisting of labour loading and unloading charges in the transport charges. He further stated that the transport charges and other handling charges like loading, unloading weighment, salvaging of foodgrains, providing casual labours etc are being governed as per the defined schedule of rates provided in the contract of Handling and Transport contract.
15. He also enclosed the copies of contract of Handling and Transport contract and Bills of transporters who provided the transport service as well as other handling charges like loading, unloading weighment, salvaging of foodgrains, providing casual labours etc.
16. M/S FCI was granted personal hearing on 28.01.2013. Shri I P Christian, Manager(Accounts) and Shri J R Thakkar, Manager(Accounts) attended the hearing on 28.01.2013 and reiterated the submissions made in their reply dated 28.06.2012 and 19.08.2011, and further stated that they paid the tax on transportation charges.
DISCUSSIONS AND FINDINGS
17. I have carefully gone through the show cause notice, the defence reply, the records available and the discussions with the representatives of M/S FCI at the time of personal hearing.
18. The point to be decided in this case is whether handling charges consisting of charges like loading, unloading weighment, salvaging of foodgrains, providing casual labours etc are to be included in the transport charges incurred by M/s FCI, on foodgrains transported by road and whether service tax has to be paid on such gross amount, which includes these charges as per Rule 2 (d) (v) of the Service Tax Rules, 1994.
19. I find that the service tax is paid by M/s FCI on reverse charge basis on GTA services. They are availing an abatement of 75% and pay service tax on 25% of the Invoice Value of the GTA services, as per Not. No. 32/2004-ST dated 3.12.2004. However, on investigation by the Preventive Section, Service Tax, Ahmedabad, it was revealed that as per the tender for Handling and Transport contract of the assessee, the transporters had provided transport services alongwith other services like pailing/loading, unloading, stacking, labour etc., and had issued Bills to M/s FCI, wherein these charges had been shown separately in addition to the transport charges shown in the same Bill. However, M/s FCI had calculated service tax on transport charges only . Thus an amount of Rs. 80,06,555/- , which was on account of handling charges viz. loading/unloading & salvaging of foodgrains, providing casual labours etc. undertaken by these transporters was not being added in their (Transporter’s) Invoice and consequently there was a short payment of Rs. 9,46,461/- by M/s FCI in view of payments made under reverse-charge mechanism..