Pranav B Prem

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the transportation of goods and the activities of unloading and loading are incidental and hence classifiable under Goods Transport Agency Service (GTA). The ruling clarifies that when the primary service is the transportation of goods, ancillary services such as loading and unloading do not alter the classification of the service.

Background of the Case

M/s. Kandarp Tradelink and Service Private Limited, the appellant, is a service tax-registered entity engaged in rendering taxable services, including clearing and forwarding agent services, storage and warehousing, cargo handling services, and Goods Transport Agency (GTA) services. During an audit, the Directorate General of GST Intelligence (DGGSTI) observed that the appellant had allegedly misclassified cargo handling services as GTA services. The appellant provided services to M/s. Fin Tech Corporation Pvt. Ltd. (FTCPL) for the supply of goods to designated locations and customers' residences as per the instructions of FTCPL. The appellant raised monthly invoices to FTCPL for these services but did not charge or pay service tax, considering the services as falling under the negative list under Section 66D(p)(i) of the Finance Act, 1994. The department issued a show cause notice to the appellant, demanding service tax amounting to Rs. 24,41,354 for the period from March 2013 to March 2016, along with interest and penalties under Section 78. The demand was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals), Jaipur. The appellant subsequently filed an appeal before CESTAT.

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CESTAT's Observations and Findings

The tribunal bench, consisting of Hon'ble Ms. Binu Tamta (Judicial Member) and Hon'ble Mr. P.V. Subba Rao (Technical Member), examined the nature of the services provided. The key issue was whether the services should be classified as Cargo Handling Services (CHS) or as GTA.

CESTAT referred to Section 65(23) of the Finance Act, 1994, which defines cargo handling services as:  "Loading, unloading, packing, or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerized freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight."

The tribunal further examined Section 65B(26), which defines a Goods Transport Agency as:  "Any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called."  The tribunal emphasized that the classification of a service depends on its essential character. In this case, the primary service provided by the appellant was the transportation of goods. The tribunal observed: "While the activities such as packing, loading, unloading and unpacking may take substantial time and may even take longer than the actual transportation, the main purpose of the contract is to transport the goods from the old to the new residence which is the essential character of the service and packing, loading, unloading and unpacking are mere incidental activities to the main function of transportation."

Judicial Precedents Considered

The tribunal relied on multiple judicial precedents to substantiate its ruling:

1. Dalveer Singh v. Commissioner of Central Excise [(2008) 9 STR 491 (Tri.-Del.)] - Held that mere transportation of goods is excluded from the purview of CHS.

2. Hira Industries Ltd. v. Commissioner of Central Excise [(2012) 28 STR 23 (Tri.-Del.)] - Established that when there is a composite service with elements of both CHS and GTA, the service should be classified under the predominant element, which in this case was transportation.

3. Bhadoria Transport Co. v. Commissioner of Central Excise & Service Tax [(2016) 46 STR 158 (Tri.-Kolkata)] - Clarified that transportation services involving incidental loading/unloading fall under GTA.

4. R.K. Transport Company v. CCE Raipur [(2012) 27 STR 496 (Tri.-Del.)] - Affirmed that loading and unloading, when integral to transportation, do not constitute a separate service.

5. Karamjeet Singh & Co. Ltd. v. Commissioner of Central Goods and Service Tax, Customs and Excise [(2024) 21 Centax 69 (Tri.-Del)] - Held: "When WCL required a service provider to move the coal from one location to another and for this purpose, engaged the service of the appellant, the essential part of the contract is of transportation. Loading and unloading are incidental to it."

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CESTAT's Final Decision

CESTAT concluded that the main activity performed by the appellant was the transportation of goods, making it classifiable under GTA as defined under Section 65B(26). The tribunal stated: "The terms of the agreement clearly reflect that the activity carried out by the appellant is mainly of transportation of goods and loading and unloading thereof is only ancillary to the main activity."  Accordingly, the tribunal set aside the demand for service tax and allowed the appeal in favor of the appellant.

Appearance

For Appellant: Ms. Shradha Agarwal, Advocate 

For Respondent: Shri Manoj Kumar, Authorized Representative 

Cause Title: M/s. Kandarp Tradelink and Service Private Limited Versus Commissioner of CGST & Central Excise- Jaipur I

Case No: Service Tax Appeal No. 50848 of 2019 [DB]

Coram: Hon’ble Ms. Binu Tamta [ Member (Judicial)] , Hon’ble Mr. P.V. Subba Rao [Member (technical)]

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