The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that Goods Transport Agency (GTA) services cannot be artificially merged with Clearing and Forwarding (C&F) Agent services merely because both are provided under the same agreement. 

The bench of  Binu Tamta (Judicial Member) and Mr. P.V. Subba Rao (Technical Member) has observed that although both services were covered by a common agreement, the agreements clearly prescribed separate rates and remuneration for C&F services and transportation services, demonstrating that they were not a single bundled service.

The appeals arose from a common Order-in-Appeal dated 23 March 2021, whereby the Commissioner (Appeals), Jaipur, upheld service tax demands confirmed against the appellants.

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The appellants had entered into agreements with their principals to provide two distinct services: Clearing and Forwarding (C&F) Agent services; and Goods Transport Agency (GTA) services.

While the appellants discharged service tax on the consideration received for C&F services, they did not pay service tax on the amounts received towards GTA services, contending that the liability under the reverse charge mechanism rested on their principals, who were body corporates. 

The Department argued that transportation formed an inseparable part of the C&F operations. According to the Revenue, the transportation activity was merely incidental to the C&F service and therefore the entire amount received by the appellants constituted consideration for a composite C&F service liable to service tax.

Based on this reasoning, show cause notices were issued and the service tax demands were confirmed by the adjudicating authority, which were later affirmed by the Commissioner (Appeals). 

The appellants maintained that the agreements specifically distinguished between C&F services and GTA services by prescribing separate remuneration for each activity.

They argued that the two services were independent taxable services; transportation charges represented reimbursement for GTA operations; they issued Goods Receipts/Consignment Notes for transportation, thereby satisfying the statutory requirements of a Goods Transport Agency; and since the service recipients were corporate entities, the liability to pay service tax on GTA services rested with the recipients under the reverse charge mechanism prescribed under Rule 2(1)(d)(d) of the Service Tax Rules, 1994. 

The Bench further noted that the issuance of serially numbered Goods Receipts/Consignment Notes established that the transportation activity qualified independently as a Goods Transport Agency service.

Since the service recipients were body corporates, the statutory liability to pay service tax on GTA services rested upon them under the reverse charge mechanism rather than on the appellants. 

The Tribunal observed that the issue had already been settled in an earlier decision involving M/s Aastha Solutions, where it was held that GTA services and C&F services cannot be treated as a single composite service merely because they arise from the same agreement.

The Bench also relied upon its earlier rulings in: Commissioner of Customs, Central Goods, Service Tax and Central Excise, Indore v. Awasthi Brother and Ridhi Sidhi Logistics v. Commissioner of Central Goods and Service Tax and Central Excise, Jodhpur. These precedents consistently held that consideration received for GTA services cannot be included in the taxable value of C&F agency services where both are separately identifiable. 

Holding that the Commissioner (Appeals) had incorrectly sustained the service tax demands, the Tribunal set aside the impugned order and allowed all three appeals.

The Bench ruled that the appellants are entitled to all consequential reliefs available under law.

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