The Karnataka High Court has held that transportation documents described as “pay slips” can legally constitute consignment notes if they contain the essential particulars required under law. As a result, the Court upheld the rejection of the company’s refund claim of ₹1.07 crore in service tax paid on transportation of iron ore. 

The Bench of Justice S.G. Pandit and Justice Rajesh Rai K while affirming the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bengaluru observed that Section 65(50b) defines a Goods Transport Agency as any person providing transportation of goods by road and issuing a consignment note. The provision does not distinguish between corporate transporters, partnership firms or individual truck owners. 

The appellant/assessee is engaged in the extraction, processing and export of iron ore, had availed transportation services for moving iron ore from mine heads to processing plants and subsequently to railway sidings, river ports and seaports during the period from January 1, 2006, to February 28, 2007.

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Following an investigation by the Preventive Division, the company deposited ₹1,07,03,293 towards service tax and education cess on transportation charges. Later, it sought a refund, arguing that the transporters were merely individual truck owners and not Goods Transport Agencies, making the levy of service tax unsustainable. The refund claim was rejected by the adjudicating authority, the Commissioner (Appeals), and eventually by CESTAT, prompting the appeal before the High Court. 

The principal question before the High Court was whether transportation carried out by individual truck owners, without formally issuing documents titled “consignment notes,” could still attract service tax under the category of Goods Transport Agency (GTA) services. 

The appellant contended that issuance of a consignment note is an indispensable statutory requirement under Section 65(50b) of the Finance Act, 1994, and that the documents relied upon by the Revenue were merely internal “pay slips” prepared for freight payments, not statutory consignment notes. Consequently, it argued that no service tax liability could arise and the amount deposited during investigation ought to be refunded. 

The department argued that the documents termed as “pay slips” contained all material particulars ordinarily found in consignment notes, including Vehicle details; Description and quantity of goods; Origin and destination points; Acknowledgment by the transporter.

The Department has contended that the nomenclature of the document was irrelevant because the statute recognizes a “consignment note, by whatever name called.” Therefore, the transportation qualified as GTA service and the tax demand was valid. 

The High Court rejected the assessee’s contention that transportation by individual truck owners automatically falls outside the ambit of GTA services.

Importantly, the Court emphasized that the statutory expression “consignment note, by whatever name called” makes the contents and legal character of the document more significant than its title.

According to the Court, where a document substantially records receipt and transportation of goods and contains the essential particulars normally associated with a consignment note, merely calling it a “pay slip” does not alter its legal nature. 

The Court further noted that the authorities had concurrently found that the pay slips documented the movement of goods and contained all material transportation details, making them functionally equivalent to consignment notes. 

The appellant relied upon several Tribunal decisions, including Chartered Logistics Ltd., Mahanadi Coalfields Ltd., Lakshminarayana Mining, East India Minerals Ltd., JWC Logistics Pvt. Ltd., and Nandganj Sihori Sugar Co. Ltd.

However, the High Court distinguished those precedents, observing that in those cases no consignment notes had been issued at all, whereas in the present case the “pay slips” themselves fulfilled the statutory characteristics of consignment notes. Therefore, those rulings were held inapplicable. 

Having concluded that the transportation services were correctly classifiable as Goods Transport Agency services, the Court held that the levy of service tax was valid. Consequently, the refund claim of ₹1.07 crore could not survive.

Finding no legal infirmity in the Tribunal’s decision, the High Court dismissed the Central Excise Appeal and ruled in favour of the department.

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