The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Bharat Heavy Electricals Ltd. (BHEL) is not liable to pay service tax on the amount towards freight and insurance facilitation.
The bench of Binu Tamta (Judicial Member) Hemambika R. Priya (Technical Member) has observed that BHEL is neither the Goods Transport Agency (GTA), nor the Courier agency hence, the activity of transportation of goods by road by them is well covered under the aforesaid provision. The amount in question is an amount towards facilitation of freight and insurance by the appellants themselves. The perusal of section 66 D (p) in itself is sufficient to hold that the service tax on the said amount has wrongly been demanded.
The appellant/assessee is engaged in rendering various services and paying service tax under forward charge for various taxable services like Erection, Commissioning and Installation service, Maintenance & Repair services, Works Contract services, Supply of Tangible Goods Service, Consulting Engineer Service, etc. and are also registered under RCM and paying service tax as service receiver under reverse charge for some services like Legal & Consultancy service, Manpower Recruitment/Supply Agency Services, Transport of Goods by Road/Goods Transport Agency Service, Works Contract Services. They are also availing CENVAT Credit facility as per the provisions of the CENVAT Credit Rules, 2004.
During the course of audit of other units of the appellant situated at Hyderabad and Bhopal, it was noticed that the said units had not paid duty on due service tax on the income received on account of facilitation of freight and insurance. Information was called for from the appellant regarding the payment for freight and insurance income.
In response, the appellant informed that they have received amount \ during the period 2015-16, 2016-17 and 2017-18 (upto June, 2017) respectively and booked as freight and insurance income in the financial records and that no service tax is payable on the said amounts as they are not “Goods Transportation Agent” or “Insurance Service Provider” and the activity of transportation of goods and insurance is undertaken by them through their contractors/vendors and service tax has been discharged thereon.
The appellant has also submitted a Work Contract entered between the appellant and the Telangana State Power Generation Corporation Limited and also a sample copy of the invoice.
The Department was of the view that on the scope of work as mentioned in the contract, the appellant is required to perform the work of unloading at site and handling inter-site and intra-site transportation, erection, testing and commissioning, completion of trial operation and handing over including insurance excluding Advance Loss of Profit (ALOP), excluding all kinds of transportation/duties on behalf of the clients for consideration.
The services provided by them appears to be covered under the taxable service as per Section 65B(44) and leviable to service tax under Section 66B. Show cause notice was issued proposing demand of service tax along with interest under Section 75 and penalty under Section 76 and 78 of the Act. On adjudication, the demand has been confirmed by the order.
The issue raised was whether the additional amounts received by the appellant towards transportation and consequent insurance booked by them under the head “Other Operational Income and Freight and Insurance Income” is in addition to the price of the goods and other Work Contract incidental to commissioning of the plant or not.
The tribunal held that no service tax is levialbe on the amount towards facilitation of freight and insurance.
Case Details
Case Title: BHEL Versus CGST Commissioner
Case No.: Service Tax Appeal No. 51700 Of 2022
Date: 08/05/2025
Counsel For Appellant: Pankhuri Srivastava and Alekshendra Sharma
Counsel For Respondent: Shashank Yadav
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