1

2
BRIEF FACTS OF THE CASE :-
M/s Navgujarat C.F.S.Agency, Navin House, Opp. Sardar Patel Hall,
Off. C.G.Road, Ahmedabad (hereinafter referred to as the said “assessee”) are engaged in providing taxable services as “ Cargo Handling Service” and “Business
Auxiliary Services” and are for the same registered with Service Tax Department having Registration Number AAEFN7449NST001.
2. During the course of audit by the officers of the Service Tax
Department, ledgers of inward and outward freight were verified and it was observed that the assessee had paid freight charges for transportation of goods.
Thus, it appeared that the assessee had received Goods Transport Agency service.
2.1 The Goods Transport Agency Service was a taxable service under section 65(105)(zzp) of the Finance Act, 1994 and was taxable w.e.f 01.01.2005.
As per Sub-section (2) of section 68 of the Finance Act, 1944 read with Rule 2(1)
(d)(v) of the Service Tax Rules, 1994, the person liable for paying service tax in relation to taxable service provided by goods transport agency, as consignor or consignee is, any person who pays or liable to pay freight either himself or through his agent for transportation of such goods by road in a goods carriage.
2.2 Notification No.32/2004-ST, dated 03.12.2004 as amended, exempts the taxable service provided by goods transport agency to a customer in relation to transport of goods by road in a goods carriage from so much of Service Tax leviable thereon as is in excess of the Service tax calculated on a value which was equivalent to 25 % of the gross amount charged from the Customer. The exemption of 75 % from gross amount would be available subject to condition that
(i) the assessee does not avail cenvat credit on inputs or capital goods used for providing such service and (ii) the assessee has not availed the benefit under notification no.12/2003, dated 20.06.2003.
2.3 Further, Ministry vide circular letter No.B1/6/2005-TRU, dated
27.07.2005, clarified that consignee or consignor was entitled for the abatement of
75% taxable service, if the “Goods Transport Agency” (GTA) makes declaration in the consignment note issued to the effect that neither credit on inputs or capital goods used for provision of service was taken nor the benefit of Notification
No.12/2003-ST was taken by them.
2.4
As per section 65 of Finance Act, 1994 “Goods” has the meaning assigned to it in clause (7) of section 2 of the sale of Goods Act, 1930 (section
65(50) and “Goods carriage” has the meaning assigned to it in clause (14) of section 2 of the sale of the Motor Vehicle Act,1988 (59 of 1988) [section 65(50a)].
As per section 65 of Finance Act, 1994 “Goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called [Section 65(50b)]. Vide Finance
(No.2) Act,2004, a sub-clause (zzp) was inserted in clause 105 of section 65 of the
Finance Act, 1994, defining taxable service as any service provided to a customer, by a goods transport agency , in relation to transport of goods by road in a goods carriage.
3. Thus, in view of the above discussion, the liability to pay service tax was on the person who pays or was liable to pay freight either himself or through his agent. In the instant case, M/s Navgujarat C.F.S. Agency, Ahmedabad who paid the freight on the transportation of goods of their client M/s Navin
Fluorine International Ltd., Udhana, Surat. Hence, M/s Navgujarat C.F.S.
Agency, Ahmedabad was required to pay the service tax on GTA service as a

3 recipient of the goods, which was worked out amounting to Rs.43,43,396/- on the total freight Rs.14,89,61,431/-, as detailed in the table given below:
Year Freight
Amount paid
Taxable value
S.T. Edu. Cess SHE Cess Total
2005-06
2006-07
In Rs. In Rs. In Rs.
23320165 5830041 583004
36805933 9201483 1104178
In Rs.
11660
22084
In Rs.
0
In Rs.
594664
0 1126262
2007-08
2008-09
2009-10
Total
36247697 9061924 1087431
28793190 7198298 863796
23794446 5948612 594861
148961431 37240358 4233270
21749
17276
11897
84665
10874 1120054
8638 889710
5949 612707
25461 4343396
3.1 It was further revealed that neither the assessee was registered for this service nor had discharged their service tax liability. Thus, Service Tax of
Rs.43,43,396/- was required to be recovered from them under proviso to section
73(1) of Finance Act, 1994 by invoking extended period of 5 years as they had suppressed the facts and not paid the service tax.
4. Further, during the verification of the records / invoices of the assessee, by the service tax audit party it was also revealed that the assessee provided ‘Cargo Handling Service’ to M/s Navin Fluorine International Ltd.,
Udhana, Surat. On verification of agreement between the Client i.e. M/s Navin
Fluorine International Ltd. Udhana, ,Surat and the assessee i.e. M/s Navgujarat
CFS Agency, it was found that the contract was for Stevedoring, Handling,
Clearing and Transportation of Flurospar imported at Kandla Port at the agreed rate of Rs.1,590/- per MT. Therefore, it appeared that the contract was for
Composite service including transportation hence the taxable value of the Service should include the cost of transportation also. However, it was observed by the service tax audit party, that the assessee raised separate bills for Cargo Handling
Charges and Transportation charges which resulted in exclusion of the transportation Charges from taxable value. Thus, it appeared that the assessee had not paid service tax on the agreed/contract price which resulted in to short payment of service tax.
4.1. The taxable service defined under section 65(23) of The Finance
Act, 1994, "Cargo Handling Service” means loading, unloading, packing or unpacking of cargo and includes,—
(a) cargo handling services provided for freight in special containers or for non containerised 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; and
(b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include, handling of export cargo or passenger baggage or mere transportation of goods;
4.2. In view of the above definition, it appeared that mere transportation of goods was not included in the definition of Cargo Handling Service. The Board had clarified the matter vide their MOF Instruction F.No.B.11/1/2002-TRU dated
01.08.2002, under para 4 that “….if the bill indicates the amount charged for cargo handling and transportation separately on actual basis (verifiable by documentary evidence), then the tax would be leviable only on the Cargo Handling Charges.
4.3. On verification of the invoices by the service tax audit party, it appeared that the cargo was not merely transported but the other cargo handling activities like loading, unloading were also carried out. Further on verification of

4
01
02
03
04
05
Invoices and ledgers of Transportation Income and Transportation Expenses, it appeared that the assessee had not charged their client on actual basis. Therefore, it appeared that the assessee had suppressed the taxable value of the same service by splitting up the bills into Cargo Handling Charges and transportation. Here the transportation was not mere transportation but was provided with other service like loading, unloading etc. for the same cargo.
5. In view of the above discussion at para 8 supra, the entire services provided by the assessee to M/s Navin Fluorine International Ltd., Udhana, Surat fell under the category of “Cargo Handling Services” for the purpose of payment of Service Tax. Accordingly, the assessee was liable to pay service tax on the total amount (Cargo Handling Charges + Transportation Charges) charged by them.
They have by vivisecting the contract into Cargo Handling and Transportation short paid Service Tax amounting to Rs. 1,92,38,781. The Service Tax short paid by them during the period 2005-06 to 2009-10 is tabulated herein below:
Sr.No Year Taxable value Service Tax Edu.Cess
2%
HSE
Cess
Total
2005-06
2006-07
2007-08
2008-09
2009-10
In Rs. In Rs.
29083200 2908320
In Rs.
58166
In Rs. In Rs.
0 2966486
47647207 5717665 114353 0 5832018
44688551 5362626 107252 53626 5523504
27229058 3267487
15060790 1506079
65350 32675 3365512
30121 15061 1551261
TOTAL 163708806 18762177 375242 101362 19238781
6. In view of the above the assessee had not declared the correct taxable value for providing/receiving taxable services on GTA, and had also not discharged their service tax liability of Rs.43,43,396/-on the said amount for the period 2005-06 to 2009-10. The assessee M/s Navgujarat C.F.S.Agency,
Ahmedabad has short paid Rs.1,92,38,781/- during the period 2005-06 to 2009-10 towards the “ Cargo Handling Service”. The total service tax leviable on M/s
Navgujarat C.F.S.Agency is Rs.2,35,82,177/-(Rupees Two Crore thirty five lakh eighty two thousand one hundred seventy seven only) [Rs.43,43,396/- for GTA +
Rs.1,92,38,781/- for Cargo handling service] they had contravened the provisions of section 67 of the Finance Act 1994 in as much as they failed to determine the correct value of taxable service provided by them; Section 68 of the Finance Act
1994 read with rule 6 of The Service Tax Rules 1994, in as much as they failed to determine and pay the correct amount of service tax; contravened the provisions of Section 70 of the Finance Act, 1994 in as much they failed to file prescribed
ST-3 returns properly. Service Tax short paid by the assessee was required to be recovered from them under proviso to Section 73(1) of Finance Act, 1994 alongwith interest under Section 75 of the Finance Act, 1994 ibid. All these acts of contravention of the provisions of Section 67, 68 and 70 of the Finance Act,
1994 appeared to be punishable under the provisions of Section 76, 77 & 78 of the
Finance Act, 1994 as amended from time to time.
7. Thus, a Show Cause Notice bearing F.No.STC/4-87/O&A/10-11 dated 18.10.2010 was issued to M/s Navgujarat C.F.S. Agency, Navin House,
Opp. Sardar Patel Hall, Off.C.G.Road, Ahmedabad to show cause as to why;
(i) Services rendered by them should not be considered as taxable service under the category of Goods Transport Agency services defined under Section 65 of the Finance Act, 1994, as amended, and the amount of taxable value of Rs.3,72,40,358/- towards GTA services for the period 2005-06 to 2009-10 in respect of payment made by them to their clients should not be considered as taxable value under Section 67 of the Finance Act 1994.

5
(ii) Service Tax amounting to Rs.43,43,396/-(Rupees fourty three lacs fourty three thousand three hundred ninety six only) for the period
2005-06 to 2008-09, should not be recovered from them under proviso to Section 73(1) of the Finance Act, 1994 as amended.
(iii) the taxable value of Rs.16,37,08,806/-towards Cargo Handling
Services for the period 2005-06 to 2009-10 should not be considered as taxable value under section 67 of the Finance Act,1994;
(iv) Service Tax Rs.1,92,38,781/- (Rupees one crore ninety two lacs thirty eight thousand seven hundred eighty one only) for the period
2005-06 to 2009-10, should not be recovered from them under
Section 73(1) of the Finance Act, 1994 as amended.
(v) Interest as applicable on the amount of Service Tax liability of
Rs.2,35,82,177/- (Rupees two crore thirty five lacs eighty two thousand one hundred seventy seven only) should not be recovered from them for the delay in making the payment, under Section 75 of the Finance Act, 1994.
(vi) Penalty should not be imposed upon them under Section 76 of the
Finance Act, 1994 for the failure to make the payment of Service
Tax payable by them.
(vii) Penalty should not be imposed upon them under Section 77 of the
Finance Act, 1994 for the failure to file prescribed Service Tax return properly and failed to obtained service tax registration in GTA in time.
(viii) Penalty should not be imposed upon them under Section 78 of the
Finance Act, 1994 for suppressing the value of taxable services provided by them before the Department with intent to evade payment of Service Tax.
DEFENCE REPLY :-
8. The assessee has, in reply to the show cause notice, vide their letter dated 20.04.2011 submitted as follows:
8.1 The Show Cause Notice was wholly illegal and without any justifiable basis, and this error of raising the above demands without any basis has occurred for the simple reason that no explanation about the issues raised in this show cause notice had ever been called for from them and no enquiry against them wherein statement of their representative could have been recorded clarifying all the above issues.
8.2 The allegations of suppression of facts levelled against them in the show cause notice were not correct and that was no short payment of service tax under GTA Service category or under Cargo Handling Service category or even otherwise.
8.3 They were a firm duly registered with the Service Tax authorities for providing Cargo Handling Service and also Business Auxiliary Service, and they have also been discharging service tax liability in accordance with the law and their transactions was within the knowledge of the Service Tax authorities in charge of their affairs. They were maintaining all books of accounts wherein full details of their transactions including the payment received by them and amounts paid by them for services have been recorded, and they have also been filing returns with the Service Tax authorities containing therein all the relevant details regarding services for which they have to pay service tax; and all such returns had been duly scrutinized, verified and assessed without any objection by the competent Service Tax authorities. Thus, the Service Tax authorities in charge of their affairs had been fully apprised of service on which service tax was

6 chargeable and also the service tax payment made by them for such taxable services.
8.4 The Show Cause Notice raised two issues, one as regards service tax payment of Rs.43,43,396/- under GTA Service category and the other for the payment of Rs.1,92,38,781/- under Cargo Handling Service category though period involved in both these cases was common i.e. 2005-06 to 2009-10. There was apparently certain duplication in the above demands.
8.5 The services of Goods Transport Agencies were availed for the cargo imported at the port for which they had handled the activities like handling discharge of material from the vessel on the jetty, supervision of discharge operations on the vessel, loading of material from jetty and storing the cargo in godown/open plot within the port area, unloading of the material at the premises/factory of M/s. Navin Fluorine etc. These activities including transportation being interlinked with one another, they were considered to be
Cargo Handling Activity for the purpose of levy of service tax. These activities was undertaken by them for those goods which had been imported by M/s. Navin
Fluorine and therefore, they were instructed by them to look after and handle all these activities under the contracts. However, there had been cases where the goods were not actually imported by M/s. Navin Fluorine but the goods imported by others, namely, M/s. BGH Exim Ltd. were purchased by M/s. Navin Fluorine after importation of the goods at the port. In such cases, shifting and storing the imported goods in the port area etc. had not been handled by them though the goods may have been ultimately purchased by their Principal M/s. Navin
Fluorine, because the importers of these goods had their own agencies for handling such operations and activities. For these goods also i.e. those purchased by M/s. Navin Fluorine from the above referred types of importers after the import was over and the goods were stored in godowns or in the port area only, the transportation from the port/godowns to the premises of M/s. Navin Fluorine had been handled by them. The difference in this case and the goods imported by M/s.
Navin Fluorine themselves has been that they had handled whole series of activities starting with discharge of the goods from the vessel and ending with delivering the goods at the premises of M/s. Navin Fluorine, whereas only transportation from the port to the premises of M/s. Navin Fluorine has been handled by them in the other case where the goods imported by others were purchased by M/s. Navin Fluorine. In cases where they had only handled transportation of the goods purchased by M/s. Navin Fluorine, the service tax had not been paid under Cargo Handling Service category but service tax had been paid under the category of GTA services by their principals M/s. Navin Fluorine for the simple reason that, as aforesaid, only transportation was handled by them for such goods for and on behalf of M/s. Navin Fluorine.
8.6 In addition to doing transportation of goods from Kandla they were also doing only transportation of Sulphur and other products on behalf of Navin
Fluorine Industries and other Clients for which Service Tax had been paid under
GTA by the concerned principals.
8.7 In the Union Budget for financial year 2008-09, the scope of “Cargo
Handling Service” was widened and new definition of Cargo Handling Service with wider coverage was brought into operation with effect from 16.5.2008.
Though they were carrying out the activities of handling of the goods imported by
M/s. Navin Fluorine for last several years, the above change in the scope of Cargo
Handling Service affected the activities with reference to the levy of service tax.
Thus, in view of the amendment made by the Union Government in respect of the scope of Cargo Handling Service the above agreement reached between them and

7
M/s. Navin Fluorine they started discharging service tax liability on the entire amount, including transportation, received by them from M/s. Navin Fluorine.
8.8 Even after May, 2008, the payment of service tax for cases where they handled only transportation had been under GTA service, and this payment was made by the Principal on the value of transportation charges arrived at after abatement allowed under the statute.
8.9 In view of the different nature of the agreements for handling the goods imported by M/s. Navin Fluorine and the goods purchased by them from importers like BGH Exim Ltd. Service tax was paid by them under different categories of services, namely: Cargo Handling Service inclusive of the transportation operation and GTA service involving transportation alone.
Payment of service tax for all these activities and services had been accordingly made right from year 2005-06, and no shortfall or short payment of service tax has occurred in this case.
8.10 PAYMENT OF SERVICE TAX UNDER THE CATEGORY OF
CARGO HANDLING SERVICES AND GOODS TRANSPORT AGENCY
SERVICES (2008-09 AND 2009-10) :The total amount received by them from
M/s. Navin Fluorine during year 2008-09 was Rs.2,94,63,817/- whereas the amount received from the Principal during year 2009-10 was Rs.4,47,83,670/-; and service tax of Rs.35,74,631/- had been paid on this value during year 2008-09 whereas service tax of Rs.46,12,721/- has been paid on this value for year 2009-
10, and thus full service tax without any shortfall stands paid up on the Cargo
Handling activity during F.Y. 2008-09 and 2009-10.
8.10.1 During these two years apart from providing services under Cargo
Handling Service, transportation was handled by them for the goods purchased by
M/s. Navin Fluorine from other importers. The value of such transportation was
Rs.2,88,54,913/- and Rs.1,34,34,935/- during year 2008-09 and 2009-10, respectively. Service tax of Rs.8,85,836/- and Rs.3,45,950/- stand paid for the above amounts during 2008-09 and 2009-10, respectively, by the concerned principals.
8.11 For the period of three years from 2005-06 to 2007-08 they were providing similar services discussed herein above. However, in this case they were paying service tax under cargo handling category was being paid for other activities i.e. those excluding transportation. Their principals namely Navin
Flourine paid Service Tax on 25% of the the freight amount under GTA category.
8.12 There is no justification in law as regards the demand of
Rs.43,43,396/- under GTA service category with reference to Rule 2(1)(d)(v) of the Service Tax Rules. Freight of Rs.14,89,61,431/- stands paid by them for transportation of the goods of M/s. Navin Fluorine to Udhna. The goods which were transported by road in goods carriages belonged to M/s. Navin Fluorine and they had only arranged for transportation of goods as their agents. The freight for such transportation was to be paid by M/s. Navin Fluorine but they had paid freight on their behalf only for convenience and for expeditious transportation of goods; and thus this freight had been paid by them as the agents of M/s. Navin
Fluorine.
8.13 In the present case the person liable to pay freight was M/s. Navin
Fluorine because they had been actually receiving the GTA service for transportation of their goods and therefore they had been paying freight through their agent i.e. them for transportation of their goods from the Port of import to their factory. The person liable to pay service tax for freight paid by them as the

8 agent of M/s. Navin Fluorine in this case has been the principal i.e. M/s. Navin
Fluorine. By virtue of Rule 2(1)(d)(v) of the above Rules, the obligation to pay service tax lay on M/s. Navin Fluorine and they had in fact paid service tax on freight paid by them through them for the transportation of their goods all throughout this period. The freight paid by them as agents of M/s. Navin
Fluorine for which the service tax demand of Rs.43,43,396/- was raised against them had already suffered the incidence of service tax because M/s. Navin
Fluorine had actually paid service tax on this freight and thus there was no justification in pressing in service Rule 2(1)(d)(v) of the above Rules against them for demanding service tax once over again on the value of the same taxable service on which full service tax already stands discharged. Thus the provisions laid down under Rule 2(1)(d)(v) of the Service Tax Rules were followed by them.
In this view of the matter, the demand of Rs.43,43,396/- as service tax on freight does not survive.
8.14 Position prior to May, 2008: Section 65(23) of the said Act defines the term “Cargo Handling Service” and it is clarified there under that Cargo
Handling Service means loading, unloading and packing or unpacking of cargo; and thus the first part of the definition of this service does not include transportation service or activities. Section 65(23) of the said Act, however, also refers to certain services by way of providing an inclusive definition, and Clause
(a) thereunder provides that cargo handling services provided for freight in special containers or for non-containerized freight was also included, services provided by a Container Freight Terminal or any other Freight Terminal were also included, and services so provided for all modes of transport and cargo handling service incidental to freight were also included under this taxable category. Clause (b) of the above Section also provides that service of packing together with transportation of cargo or goods was also included irrespective of whether further services like loading, unloading, unpacking etc. were also provided along with; but it is specifically clarified under Clause (b) of the above Section that mere transportation of goods was not covered under this taxable category. Thus it was clear that cargo handling service was a taxable service which did not include transportation of goods, and only that freight was included which was for services provided in special Containers or for Non-Containerized freight when the services were provided by a Container Terminal or any other freight terminal. It was again emphasized that transportation of goods was not covered under Cargo Handling
Service because definition of this service under Section 65(23) of the said Act does not cover transportation of goods whereas there is a separate taxable category for transportation of goods specifically provided by the legislature under Section
65 (105)(zzp) of the said Act as regards transport of goods by road service.
8.15 Even by virtue of Circular No. B.11/1/2002-TRU dated 1.8.2002, which is referred to in para 10 of the show cause notice also, the Government has clarified that the measure of tax was the gross amount charged by the Cargo
Handling agency from the customer, and therefore the tax was leviable only on the cargo handling charges when the bill indicated the amount charged for cargo handling and transportation separately on actual basis (verifiable by documentary evidence). It was further clarified by virtue of this circular dated 1.8.2002 that only if lumpsum amount was charged for both transportation and cargo handling, the tax would be payable on the entire amount under Cargo Handling Service category, but the tax would be leviable only on the Cargo Handling charges when such charges and transportation charges were billed and charged separately. This
Circular was admittedly applicable in the present case, and therefore the same was also referred to in para 10 of the show cause notice. In view of the above provisions, it was clear that transportation charges for transportation service charged separately shall not be leviable to service tax under Cargo Handling
Service category, and since they had been issuing two separate bills in accordance

9 with the agreements with M/s. Navin Fluorine, one for cargo handling service and the other for the transportation charges, there was no dispute in this proceedings that cargo handling charges were separately billed and charged by them whereas transportation was also separately charged and recovered by them. They emphasized that charging or recovering amounts for cargo handling and for transportation separately was an admitted fact in this proceedings, and they also emphasized that the transportation charges separately charged by them had been recovered on actual basis and the basis therefore has been the contracts between the parties was also an admitted fact in this proceedings.
8.16 They therefore submitted that the law as regards the scope of cargo handling service and facts as regards their real activities were clear in this case.
The law as regards Section 65 (23) of the Act is as clarified vide the above
Circular dated 1.8.2002 whereas the fact of this case was that they had not charged any lumpsum amount from M/s. Navin Fluorine for both transportation and cargo handling but they had charged separate amounts for cargo handling and transportation separately. In this view of the matter, the basis on which demand for Rs.1,92,38,781/- was raised against them was unsustainable.
8.17 The suggestion about the splitting up the bills was factually incorrect and that the said facts had also not been taken into consideration while issuing the show cause notice because no enquiry whatsoever was caused by the Service Tax audit authorities before raising this issue. Therefore, they referred to the relevant facts with documentary evidence in this regard so as to establish beyond doubt that transportation has been a totally separate activity and also that there has not been any escapement of transportation charges from collection of service tax in this case.
8.18 They have been rendering cargo handling service in favour of M/s.
Navin Fluorine for last several years. The first agreement between them and M/s.
Navin Fluorine was made on 16.11.2004. They were entrusted under this agreement only those service and activities which were later on covered under
Section 65 (23) of the said Act as Cargo Handling Services. It was clear from this agreement dated 16.11.2004 that transportation was not an activity entrusted to them under this agreement and thus transportation has been treated as a separate activity even by the Principal when the works of Stevedoring, Handling, Clearing,
Forwarding etc. was entrusted to them under this agreement. Thereafter, a separate agreement was made on 19.1.2005 between M/s. Navin Fluorine and them thereby entrusting to them the work of transportation of imported Fluorspar from the Port to their Bhestan factory, and the transportation charges were also agreed under the said agreement dated 19.1.2005
. Thus, this agreement also showed that transportation was a separate and independent activity, and it was not a part of the other works of Stevedoring, Handling, Clearing, Forwarding etc. In accordance with these agreements, they had been providing the services of Stevedoring,
Handling, Clearing, Forwarding etc. separately and also transportation separately, and accordingly, the charges were also billed separately from the beginning.
There has not been any splitting up of the works or the charges as suggested in the
Show Cause Notice. When the agreements were to be renewed, the Principal felt that a combined agreement could be made and therefore a contract dated
10.1.2006 was made for the works of stevedoring, shifting, handling, custom clearance etc. and also for transportation of imported goods from the Port to the factory. It was clear from this agreement that the works were clearly defined thereunder and the amounts i.e. charges for the works and services were also separately specified under the agreement. For transportation of goods from
Kandla Port to the factory, an amount of Rs.955/- per MT was agreed under this agreement, and charges for unloading of the material at Bhestan were also agreed thereunder. Thus, while renewing their previous contracts and making a combined

10 agreement on 10.1.2006 also, transportation was considered to be a separate service and charges for this separate service were also separately specified under the agreement. They had been accordingly billing the transportation charges separately.
8.19 It was also clear from all the above contracts beginning with contracts dated 16.11.2004 and 19.1.2005 that the contract between them and M/s.
Navin Fluorine has never been for a composite service but the contract has always been for separate services like stevedoring, handling, customs clearance etc. and separately for transportation. The basis on which the demand was raised against them that the contract was for composite service including transportation was also therefore incorrect and contrary to the facts and evidence of this case.
8.20 The suggestion made in the Show Cause Notice that the activity was not mere transportation but provided with other services like loading, unloading for the same cargo was ill-founded and misconceived. The loading, unloading of cargo had also been a part of the Cargo Handling Service in this case and therefore payment of service tax on the value of loading, unloading of cargo under Cargo
Handling Service category has been correctly and properly made by them.They therefore submitted that transportation of imported goods from the Port to the factory of the principal had not been a part of Cargo Handling Service and therefore, the suggestion made in the Show Cause Notice that “it was not mere transportation” was without any basis. Accordingly, the proposal to include transportation charges in the taxable value of the Cargo Handling service for the period prior to May, 2008 had no merit in the present case.
8.21 The position after May, 2008 has been that they had discharged service tax liability under Cargo Handling Service category for those contracts where they had provided cargo handling service (which would include a series of activities and transportation also) and service tax stands paid in such cases on the entire amount collected by them from M/s. Navin Fluorine, whereas service tax under GTA category stands paid by M/s. Navin Fluorine for those cases where they arranged only transportation for the goods purchased by them.
8.22 For the entire period i.e. till May, 2008 and even thereafter, service tax was being paid under GTA service category for all those contracts under which they had arranged for transportation alone. They have been the contractors i.e. agents of M/s. Navin Fluorine by virtue of the agreement between them and therefore, service tax on transportation chares was the liability of the Principal i.e.
M/s. Navin Fluorine who had always discharged the liability for paying service tax on such transportation charges also.
8.23 For the transportation charges recovered by them from M/s Navin
Fluorine by way of separate bills for the period prior to May, 2008 also they had paid due service tax under GTA service category. The due amount of service tax has always been paid by M/s. Navin Fluorine on the transportation charges under
GTA category. Therefore, proposal to recover service tax on the transportation charges again, may be from another person, was illegal and without jurisdiction because the law does not empower the authorities to levy and collect service tax twice on the same activity. In this view of the matter, when service tax was admittedly paid by M/s. Navin Fluorine on the same transportation charges for which the show cause notice was issued to them, the proposal to recover
Rs.1,92,38,781/- as service tax from them does not hold any water.
8.24 The demand of Rs.43,43,396/- and further demand of
Rs.1,92,38,781/- were not two separate cases and, as aforesaid, there was a

11 duplication of demand resulting in unjustifiably higher figure of total demand of
Rs.2,35,82,177/-.
8.25 The Show Cause Notice was issued in October, 2010, and it was issued at the instance of the Service Tax audit party. The service tax authorities in charge of their firm as well as in charge of M/s. Navin Fluorine had not raised any objection as regards payment and assessment of service tax under Cargo Handling
Service by them and GTA service category by M/s. Navin Fluorine. Only because the service tax audit authorities entertained a different view, although incorrect, the allegation of suppression of facts could not be levelled against them. It was the case of the Revenue itself that the details of freight paid by them and transportation charges recovered by them were shown in their books of accounts including ledger; and it was on basis of figures shown in books of accounts that the Show Cause Notice was issued to them. When all the details of freight paid and transportation charges incurred thus appeared in the books of accounts which were public documents, there was no justification in alleging suppression of facts on their part in this case. Larger period of limitation therefore cannot be invoked against them in this view of the matter.
8.25.1 They relied upon the following cases in support to their contention: i.
Hon’ble Supreme Court judgment in the case of Padmini Products and
Chemphar Drugs & Liniments reported in 1989 (43) ELT 195 (SC) and
1989 (40) ELT 276 (SC). ii.
Hon’ble Supreme Court judgment in the case of Continental Foundation
Jt. Venture V/s CCE, Chandigarh reported in 2007 (216) ELT 177 (SC)
8.26 When there was no justification in demand of service tax in this case, the proposal to impose penalty was also not sustainable as there was no violation of any nature committed by them. They had not acted dishonestly or contumaciously and therefore, even a token penalty would not be justified. No malafide intention on their part was also alleged in this notice. There was also no specific reason or ground spelt out in the notice for proposing to impose penalty and thus, penalty could not be imposed on hearsay or presumption. In view thereof, the proposal for imposition of penalty under Sections 76, 77 and 78 of the
Finance Act also does not hold any water and hence, it deserved to be dropped.
9. A Personal hearing was granted on 2.8.11. M/s Navgujarat C.F.S.Agency vide their letter dated 1.8.11 requested for another date. Next date for personal hearing was fixed for 26.08.11. M/s Navgujarat C.F.S.Agency vide their letter dated 9.8.11 again requested for another date. Personal hearing was fixed for
29.09.11. None appeared. The advocate vide letter dated 27.09.11 sought adjournment. Next date was fixed for 19.10.11. Shri Paresh M. Dave, Advocate appeared for personal hearing along with Shri Hemant Shah, Managing Director.
They claimed that for the year 2008-09 and 2009-10, the figures given in para 11 of the SCN infact pertain to mere transportation for which no cargo handling service was provided by them. They sought short adjournment for submitting proof and reconciliation of the same. Next date was fixed for 11.11.2011. Shri
Paresh M. Dave, Advocate appeared for personal hearing along with Shri Hemant
Shah, Managing Director. The learned advocate explained the case in brief and gave further written submission.
10.
Written submission made by M/s Navgujarat during the course of Personal
Hearing on 11.11.2011:
10.1 Details in the table at paragraph 2 of the show cause notice were taken from the freight ledgers for years 2005-06 to 2009-10. Whatever freight was paid by them (as agents of M/s Navin Fluorine International Limited) during this

12 period was shown in their freight ledgers, but freight in the ledgers included only those cases where motor vehicles like trucks were hired from outside goods transport agencies. In other words, cases where their own trucks were used for transportation of materials of the above principal Messrs Navin Fluorine were not covered in this case because no freight was paid by them to anyone when their own trucks were used for the above purpose.
10.2. A total sum of Rs. 1,61,43,937/- was paid as freight to outside GTAs during F.Y 2009-10 for transporting a total quantity of 19,948 Metric Tons of materials for those cases where the entire work i.e. from unloading the imported materials from vessels, stevedoring, handling, clearing and transportation was handled by them for the above principal and service-tax was paid on the entire value of all these activities under Cargo Handling Service category. Thus, though the above sum of Rs. 1,61,43,937/- was paid by them as freight to the trucks of outside GTAs and hence this amount appeared in their freight ledger, service-tax on this amount stands paid under Cargo Handling Service category because, as aforesaid, the entire amount paid to them by Messrs Navin Fluorine for the above integrated activities was subjected to levy of service-tax under Cargo Handling
Service.
10.3 For this period i.e. F.Y 2009-10, they had handled only transportation activity also for the goods of Messrs Navin Fluorine for which the other services like stevedoring, clearing etc. were not performed by them; and therefore, the sum of Rs. 76,50,509/- shown as freight paid in their freight ledger was for transporting a quantity of 9,177 Metric Tonnes of the materials for which no cargo handling service was provided by them
10.4 When the above two figures of Rs. 1,61,43,937/- and Rs. 76,50,509/- are totalled up, the total freight paid by them during 2009-10 would come to Rs.
2,37,94,446/-; and this figure taken from their freight ledger appeared in column 2 against year 2009-10 in table at para 2 of the show cause notice also.
10.5 The same way, the figures of Rs. 1,03,16,116/- and Rs. 1,84,77,074/- were bifurcated in the statement Page 1 for year 2008-09 also, and the total of these two figures appearing in their freight ledger as freight paid would come to
Rs. 2,87,93,190/-, which was the figure appearing in column 2 against year 2008-
09 of the table at para 2 of the show cause notice also.
10.6 In this year also, freight element involved for providing cargo handling service by them was Rs. 1,03,16,116/- on which service-tax stands paid under Cargo Handling Service category by taking the entire amount paid to them by Messrs Navin Fluorine inclusive of freight element as value of cargo handling service. For only transportation service, freight of Rs. 1,84,77,074/- was paid by them for transporting the materials of the said principal.
10.7 The freight for cargo handling services rendered by them during the period from 2005-06 to 2007-08 was not shown, because they had started paying service-tax on the entire amount paid to them by Messrs Navin Fluorine considering the same as value of cargo handling service from May, 2008.
10.8 However, they had paid freight for transporting the materials of the said principal when outside trucks were hired during these three years also, and therefore they had shown the figures of the quantity transported and freight paid for transportation for these three years, namely 2005-06, 2006-07 and 2007-08 in the statement page 1, and the figures of freight paid shown in this statement match with the figures shown in column 2 of table at para 2 of the show cause notice because these figures were taken from their freight ledgers only.

13
10.9
The total figure of “Taxable Value” shown as 16,37,08,806 under column 3 of table at para 11 of the show cause notice was correctly arrived at by the Audit Officers, but the bifurcation thereof shown against serial Nos. 1 to 5 for years 2005-06 to 2009-10 were not correctly taken. i) For F.Y 2005-06, the transportation cost recorded in their books of accounts had been Rs. 2,77,17,215/- but the Officers had taken it as
Rs. 2,90,83,200/-, and thus an amount of Rs. 13,65,985/- was taken in excess by the Officers. This was because, two bills issued on
11.4.2006 for Rs. 11,18,572/- and Rs. 2,47,413/- had been included by the officers in the transportation cost for F.Y 2005-06 though these two bills were raised in April, 2006 and therefore, they appeared in the next financial year of 2006-07 in their books of account. ii) For the next financial year i.e. F.Y 2006-07, the above figure of Rs.
13,65,985/- would appear in their books of account whereas the same would obviously not be taken into consideration by the officers; but in addition to this figure, there have been other errors also of the same nature on the part of the officers. Five bills pertaining to the subsequent financial year i.e. F.Y 2007-08 appeared to have been taken into consideration by the officers while arriving at the figure of transportation costs for 2006-07 in the show cause notice. When the adjustment of the amount of the previous year i.e.
Rs. 13,65,985/- and also for further five bills is made, it would appear that the figure of Rs. 4,52,81,487/- as transportation cost in their books of account was correct. iii) Similar errors had occurred in subsequent years also and details of these errors were shown in the remarks column of the statement page 2 submitted by them. iv) When all the above factual errors committed by the officers were corrected, it would appear that the total transportation cost of Rs.
16,37,08,806/- was arrived at, and this amount considering the details of all the five years together would tally with the total shown under column 3 of table at page 11 of the show cause notice also.
10.10 The figures shown in the table at para 11 of the show cause notice were taken by the officers from the transportation bills raised by them on their principal Messrs Navin Fluorine. These figures were apparently not taken from the freight ledger, because the figures taken from the freight ledgers showing the actual amount of freight paid by them were shown in the table at para 2 of the show cause notice. The transportation cost shown in para 11 of the show cause notice from their bills issued to the said principal was higher because, in ordinary course of business, they had billed and recovered a little higher amount from the principal compared to the actual freight/transportation cost paid by them to the outside transporters. To meet with exigencies and also for covering the administrative and other office expenses incurred by them for arranging transportation of their goods in this activity, they had billed a little higher amount and therefore, the transportation cost derived from the bills raised by them on the said principal was higher compared to the actual freight paid by them for transporting their materials. However, the principal has paid service tax on the entire amount billed by them to the principal (which was paid by the principal to them towards transportation cost) under the GTA category and therefore ,(copy of certified copy of tax paid by their princpals was enclosed herwith) no amount billed by them and paid by the principal as transportation cost has escaped assessment, and service tax paid on this entire amount by the principal under GTA category. These details could also be seen in the second part of the statement page
1 where also they had compiled the details of the actually billed amounts with

14 reference to quantities of materials transported during each year, and thus it would be clear from this part of statement page 1 also that no amount billed and recovered by them as transportation cost remains unassessed to service-tax under
GTA category.
10.11 Whatever service tax has been paid in this case, the same was admissible as cenvat credit to M/s. Navin Fluorine. Service tax paid by them under cargo handling service was availed as cenvat credit by them, and service tax paid by them on transportation cost under GTA service was also availed as cenvat credit by them; and therefore, if further service tax was to be paid on any differential value/amount in this case, the same would have been fully available to the Principal as credit to be utilised for paying excise duties on their final products. Admissibility of cenvat credit was considered also by the Principal as was clear from their letter dated May 02, 2008 at page 48 (Anx.B) to their reply dated 20/26.04.2011.
10.12 In support of their contention they have relied on the following cases: i.
M/s Narmada Chematur Pharmaceuticals Ltd. reported in
2005(179)ELT 276(S.C.) ii.
CCE,Pune V/s Coca-Cola India Pvt.Ltd. reported in 2007(213)ELT
490(SC) iii.
M/s SRF Ltd.2007(81)RLT 479 iv.
M/s PTC Industries Ltd.2003(159)ELT 1046 v.
M/s Reliance Industries Ltd.2009 (244) ELT 253(paras 21, 34 and
35 of the decision)
DISCUSSION AND FINDINGS :-
11. I have carefully gone through the Show Cause Notice, the defense reply filed by M/s Navgujarat, the submissions made during the course of personal hearing and records available with this office.
12. The issues to be decided in this case are: i)
Whether, M/s Navgujarat can be termed as receiver of “Goods Transport
Agency services” liable to pay service tax as per Rule 2(1)(d)(v) of Service Tax
Rules, 1994 under reverse charge mechanism when they made payment of freight to the Goods Transport Agencies for transport of goods to M/s Navin Fluorine
International Ltd, Surat. ii) Whether, M/s Navgujarat had short paid service tax on transportation charges under the category of “Cargo Handling Service” by splitting the bills in to transportation charges and handling charges.
13. I find that M/s Navgujarat have contended the case on following grounds: i) M/s Navin Flourine International Ltd had awarded them two contracts, one for cargo handling and other for transportation of goods which were revised from time to time. ii) Accordingly, they carried out cargo handling of goods imported by M/s
Navin Flourine International Ltd and paid service tax under the category of “Cargo handling service”. They also arranged transportation of such goods and paid freight to the Goods Transport Agencies, the rate of which was less than the contracted rate. Till May’2008, they used to raise bills of freight to M/s Navin
Flourine International Ltd as per the contracted rate. The difference between the

15 two rates was their profit. M/s Navin Flourine International Ltd paid service tax on the amount of bills raised by them after taking permissible abatement of 75% as per Notification No. 32/2004-ST dated 3.12.2004. From May’2008 onwards, with change in the definition of “Cargo handling service” they started paying tax on the total value i.e. the value of Cargo handling charges and the freight amount under the category of “Cargo handling service” and M/s Navin Flourine International
Ltd availed cenvat credit on the service tax paid by them. iii) M/s Navin Flourine International Ltd also purchased goods imported by other importers and they (i.e. M/s Navgujarat) had no role in cargo handling of such goods. For such goods also they arranged transportation and paid freight to the Goods Transport Agencies, the rate of which was less than the contracted rate.
They then raised bills of freight to M/s Navin Flourine International Ltd as per the contracted rate. The difference between the two rates was their profit. M/s Navin
Flourine International Ltd paid service tax on the amount of bills raised by them after taking permissible abatement of 75% as per Notification No. 32/2004-ST dated 3.12.2004. iv) For the entire period of demand i.e. from 2005-06 to 2009-10, the principal
M/s Navin Flourine International Ltd being the consignee of goods had paid due service tax on the entire amount of freight bills raised by them (i.e. M/s
Navgujarat) under the category of “Goods Transport Agency Service” in the case where the goods were purchased by M/s Navin Flourine International Ltd and no cargo handling was done by them (i.e. M/s Navgujarat). v) For the period of demand from 2005-06 to May’2008, the principal M/s
Navin Flourine International Ltd being the consignee of goods had paid due service tax on the entire amount of freight bills raised by them (i.e. M/s
Navgujarat) under the category of “Goods Transport Agency Service” in the case where the goods were imported by M/s Navin Flourine International Ltd and cargo handling was done by them (i.e. M/s Navgujarat). vi) There is duplication of demand in the two tables of the show cause notice resulting in to unjustifiably higher demand figure of Rs.2,35,82,177/-. vii) Therefore, no service tax has been short paid either under the category of
“Cargo handling service” or “Goods Transport Agency Service” as alleged in the show cause notice.
14. I now proceed to decide the case and also verify the correctness of contentions made by M/s Navgujarat.
15. I find that M/s Navin Flourine International Ltd vide their letter dated
16.11.2004 awarded a contract for stevedoring, handling, custom clearing and storage of imported Flourspar at Kandla port to M/s Navgujarat. For stevedoring, handling, clearing & forwarding the contracted rate was Rs. 275/- per MT whereas the storage charges were on monthly basis. I also find that M/s Navin Flourine
International Ltd vide their letter dated 19.1.2005 awarded a contract to M/s
Navgujarat for transportation of imported Flourspar from Kandla port to Bhestan and the contracted rate for transportation was Rs. 910/- per MT plus unloading charges of Rs. 20/- per MT. The said contract was then revised vide letter dated
10.1.2006 of M/s Navin Flourine International Ltd and the rate for transportation was revised to Rs. 955/- per MT. The said transportation rate was again revised to
Rs. 1,225/- per MT vide letter dated 6.4.2006. Thereafter, vide letter dated
28.3.2008, the rate for stevedoring and handling was revised to Rs. 315/- per MT whereas, the rate of transportation remained unchanged at Rs.1,225/- which were later on revised to Rs.1,280/- per MT vide letter dated 1.6.2009. Thus, I find that

16 there is no composite contract for stevedoring, handling, clearing and transportation of fluorspar as alleged in the show cause notice but two separate contracts one for stevedoring, handling, custom clearing and storage of imported
Flourspar at Kandla port and second for transportation. I further observe that in the
“Terms & Conditions” of the contracts dated 6.4.2006, 28.3.2008 (for transportation of cargo purchased on High Sea sales) and 1.6.2009 (for transportation of cargo purchased on High Sea sales) it is agreed that the service tax on the transportation charges will be paid by M/s Navin Flourine International
Ltd under the category of “Goods Transport Agency”. Similarly, there is a separate contract dated 16.6.2006 for lifting of sulphur from Jamnagar to Bhestan specifying the freight charges as Rs. 1,030/- per MT and unloading charges as Rs.
20/- per MT.
15.1 The above contracts are scanned and reproduced herein below:
CONTRACT DATED: 16.11.2004

17
CONTRACT DATED: 19.1.2005

CONTRACT DATED 10.1.2006
18
CONTRACT DATED 6.4.2006

19
CONTRACT DATED 28.03.2008

20

Contract dated 1.6.2009
21

22
Thus on perusal of the above said contracts it is apparent that right from the first contract dated 16.11.2004, there are different contracts for cargo handling and transportation which clearly mention the two contracted rates and wherever, there is a single contract such as that dated 28.3.2008 and 1.6.2009, for stevedoring, handling, clearing and transportation of AGF, rates for cargo handling and

23 transportation are separately mentioned. Therefore, allegation of a composite contract does not sustain.
15.3 As per Rule 2(1)(d)(v) of Service Tax Rules, 2004, person liable for paying service tax means in relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is,---
(a) any factory registered under or governed by the Factories Act, 1948 (63 of
1948)
(b) any company established by or under the Companies Act, 1956 (1 of 1956)
(c) any corporation established by or under any law
(d) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India
(e) any co-operative society established by or under any law
(f) any dealer of excisable goods, who is registered under the Central Excise Act,
1944 (1 of 1944) or the rules made thereunder
(g) any body corporate established, or a partnership firm registered, by or under any law any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage;
15.4 I find that in the instant case, M/s Navgujarat is neither a consignor nor a consignee of the goods as they are not the persons having ownership of the transported goods which are either imported or purchased by M/s Navin Flourine
International Ltd. The terms consignor and consignee have not been defined in the
Finance Act, 1994, therefore, I look in to the dictionary meaning of both the terms as given in Business Dictionary.com which are as under:
Consignor Definition: Person or firm (usually the seller) who delivers a consignment to a carrier for transporting it to a consignee (usually the buyer) named in the transportation documents. Ownership (title) of the goods remains with the consignor until the consignee pays for them in full.
Consignee Definition: A party (usually a buyer) named by the consignor (usually a seller) in transportation documents as the party to whose order a consignment will be delivered at the port of destination. The consignee is considered to be the owner of the consignment for the purpose of filling the customs declaration, and for paying duties and taxes. Formal ownership of the consignment, however, transfers to the consignee only upon payment of the seller’s invoice in full.
15.5 I find that M/s Navgujarat is the person entrusted with the work of transportation of goods owned by M/s Navin Flourine International Ltd from
Kandla Port to their factory at Bhestan on rates which are mutually agreed between them under the relevant contracts. I find that M/s Navgujarat in order to earn some profit booked the trucks at rates less than the contracted rates between them and M/s Navin Flourine International Ltd and made payment of freight to the transporters. I find that payment of freight charges to the Goods Transport
Agencies which are later on recovered by them from M/s Navin Flourine
International Ltd will neither make M/s Navgujarat the recipients of “Goods
Transport Agency Service” nor will it bring them within the category of the persons liable for paying service tax as per Rule 2(1)(d)(v) of Service Tax Rules,
2004. In the present case, M/s Navin Flourine International Ltd are themselves the consignors as well as the consignees of the goods transported by M/s Navgujarat and are therefore the actual service recipients of “Goods Transport Agency
Service”.

24
15.6 In view of the above, I conclude that the only person liable to pay service tax under reverse charge mechanism as per Rule 2(1)(d)(v) of Service Tax Rules,
2004 in the case before me is M/s Navin Flourine International Ltd and not M/s
Navgujarat. M/s Navin Flourine International Ltd in the aforesaid contracts dated
6.4.2006, 28.3.2008 (for transportation of cargo purchased on High Sea sales) and
1.6.2009 (for transportation of cargo purchased on High Sea sales) have also undertaken to pay service tax under the “Goods Transport Agency Service”. I further find that M/s Navin Flourine International Ltd vide a certificate dated
5.11.2011 have stated that for the years from 2005-06 to 2009-10 they have paid service tax on the value of transportation cost incurred by M/s Navgujarat for transportation of their goods. They also submitted the year wise, invoice no. wise details of the service tax paid by them after availing abatement of 75% as per
Notification No. 32/2004-ST dated 3.12.2004. In view of the above, demand of
Rs. 43,43,396/- does not sustain on merit.
15.7 I find that demand of Rs. 43,43,396/- in Table at para 2 of the show cause notice has been worked out on the basis of Transport Expense as shown in the
Ledger Account for the years 2005-06 to 2009-10 which is the sum total of freight amount paid by M/s Navgujarat which includes, the freight amount in case of imported goods whether fluorspar or sulphur, where cargo handling is done by
M/s Navgujarat and also the freight amount where goods are purchased by M/s
Navin Flourine International Ltd and no cargo handling is done by M/s
Navgujarat. I further find that demand of Rs. 1,92,38,781/- in table at para 11 of the show cause notice is worked out on the basis of Transport Income as shown in the Ledger Account for the years 2005-06 to 2009-10. As discussed above, M/s
Navgujarat, for the goods imported and purchased by M/s Navin Flourine
International Ltd had arranged transportation and paid freight to the Goods
Transport Agencies, the rate of which was less than the contracted rate and then raised bills of freight to M/s Navin Flourine International Ltd as per the contracted rate. Accordingly, M/s Navin Flourine International Ltd paid the bill amount to
M/s Navgujarat which are shown as Transport Income by M/s Navgujarat in the
Ledger Account for the years 2005-06 to 2009-10. This has resulted in to a situation where a demand is raised on an expense of say Rs. 100/- and also a demand on say Rs. 110/- which is the income. This is not only illogical but also not in accordance with the law. I observe that the same amount cannot be subjected to service tax twice. Therefore, once the demand of Rs. 1,92,38,781/- is raised on the basis of income as detailed in table at para 11 of the show cause notice, demand of Rs. 43,43,396/- worked out on the basis of expense would amount to duplication. Therefore, I uphold the contention of M/s Navgujarat with regard to duplication of demand. In view of the above, demand of Rs. 43,43,396/- does not sustain even on the ground of duplication.
15.9 In view of the above, I hold that the demand of service tax of Rs.
43,43,396/- is not sustainable. Consequently, the proposal for imposition of penalty and recovery of interest on the said demand also do not survive.
16. Now, I come to the second allegation of non payment of service tax on the transportation charges collected by M/s Navgujarat from M/s Navin Flourine
International Ltd while providing “Cargo Handling Service”.
16.1 Before, I proceed to discuss the issue on merit, I observe that the year wise demand of Rs. 1,92,38,781/- in table at para 11 of the show cause notice is worked out on the basis of the service tax rate prevalent for a period of time and therefore there is some difference in the figures of taxable value as shown in the said table and as appearing in the Ledger Accounts supported by the bill wise details submitted by M/s Navgujarat. However, the total taxable value for the entire period of demand remains unchanged as shown in the below given table:

25
Year
2005-06
2006-07
2007-08
2008-09
2009-10
Total
As per Ledger
1,34,34,935/-
As per show cause notice
1,50,60,790/-
Difference
2,77,17,215/- 2,90,83,200/- (-) 13,65,985/- 10.2%
4,52,81.487/- 4,76,47,206/- (-) 23,65,719/- 12.24%
4,84,20,256/- 4,46,88,552/- (+) 37,31,704/- 12.36%
2,88,54,913/- 2,72,29,058/- (+) 16,25,855/- 12.36%
(-) 16,25,855/-
16,37,08,806/- 16,37,08,806/- 0
Service tax rate as applied in the show cause notice
10.3%
16.2 Prior to 16.5.2008, the definition of “Cargo Handling Service” under
Section 65(23) of the Act, read as:
"cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised 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, but does not include handling of export cargo or passenger baggage or mere transportation of goods".
16.2.1 W.e.f 16.5.2008, the following definition of “Cargo Handling Service” has been made effective:
"Cargo handling service" means loading, unloading, packing or unpacking of cargo and includes—
(a) cargo handling services provided for freight in special containers or for non-containerised 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; and
(b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include handling of export cargo or passenger baggage or mere transportation of goods.
16.2.2 The key ingredients of the definition of “Cargo Handling Service” are as under :
(i) Cargo handling service is,
(a) loading,
(b) unloading,
(c) packing, or
(d) unpacking of cargo.
(ii) Cargo handling service also includes,
(a) cargo handling services provided for freight in special containers or for non-containerised freight;
(b) services provided by a container freight terminal or any other freight terminal, for all modes of transport;
(c) any other service incidental to freight.
(iii) Cargo handling service also includes service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, and unloading, unpacking.
(iv) Cargo handling service does not include the following services :
(a) handling of export cargo,
(b) handling of passenger baggage, and
(c) mere transportation of goods.
16.3 In view of clause (b) of the said definition, M/s Navgujarat has contended that they have started paying service tax on the total value i.e. the cargo handling

26 charges as well as the freight amount under the category of “Cargo Handling
Service” w.e.f 16.5.2008. However, prior to 16.5.2008, M/s Navgujarat paid service tax under “Cargo Handling Service” on the cargo handling charges received from M/s Navin Flourine International Ltd but the service tax on the freight amount was paid by M/s Navin Flourine International Ltd after availing abatement of 75% under Notification No. 32/2004-ST dated 3.12.2004.
16.4 Para 4 of Annexure II to Circular F.No.B.11/1/2002-TRU dated 1.8.2002
reproduced below clearly states as:
“A point has been raised as to what would be the value of service tax in a case where transport and cargo handling service is provided in a composite manner.
The measure of tax is the gross amount charged by the cargo handling agency from the customer. Therefore, if lumpsum amount is charged for both transportation and cargo handling, the tax will be payable on the entire amount.
On the other hand, if the bill indicates the amount charged for cargo handling and transportation separately on actuals basis (verifiable by documentary evidence), then the tax would be leviable only on the cargo handling charges.”
16.5 I have already discussed above, that right from the beginning there were separate contracts for cargo handling as well as transportation of goods, the two services were never provided in a composite manner and the two charges were separately identifiable. I find that in terms of the said contracts, M/s Navguajrat had issued separate bills for Cargo Handling, Transportation and Unloading at the
Principals premises during the period prior to May,2008. There never was any contract for charging a lumpsum amount in respect of all the services provided by
M/s Navgujarat to M/s Navin Flourine International Ltd.
16.6 Thus, correlating the details contained in the circular with the definition of
“Cargo Handling Service”, nature of contracts and the practice of billing adopted by M/s Navgujarat as discussed in para supra, I am convinced that for the period prior to May,2008, M/s Navgujarat was required to pay service tax only on the amount charged by them for providing services relating to stevedoring, custom clearing, handling the cargo in port area, shifting the cargo from port area to custom bonded warehouse and loading the same in trucks for further transportation under the category of ‘Cargo Handling Services’ regarding which there is no dispute whereas, on the freight amount there was no liability of service tax to be discharged by M/s Navgujarat under the category of ‘Cargo Handling
Services’. I observe that for taxation under the category of “Cargo Handling
Service”, the service provided should be relating to or in relation to cargo handling by a cargo handling agency and the service provided should be integrally or inseparably connected with handling of cargo or attributable thereto without being a mere activity of transportation of such cargo since mere transportation of goods is excluded from the definition of “cargo handling service” under Section 65(23) of the Act. The freight amount paid towards the transportation of the Cargo from warehouse at Kandla to the premises of M/s Navin Flourine International Ltd at
Bhestan was liable to service tax under the category of “Goods Transport Agency
Service” and M/s Navin Flourine International Ltd were liable to pay service tax on the freight amount under the said category for which bills were raised by M/s
Navgujarat to them as per the contracted rates.
16.7 I have already discussed the issue on merit above and arrived at a conclusion that M/s Navin Flourine International Ltd were the person liable to pay service tax under reverse charge mechanism as per Rule 2(1)(d)(v) of Service Tax
Rules, 2004. In view of this demand for the period prior to 16.5.2008 doesnot sustain on merit.

27
16.8 For the period from 16.5.2008 onwards, it is the contention of M/s
Navgujarat that they have paid service tax on the entire value which includes the cargo handling portion and the freight amount. I find that during the period from
1.4.2008 to 31.3. 2009, M/s Navgujarat had issued invoices for cargo handling charges and transportation charges having total taxable value of Rs. 2,94,63,816/-.
I find from the two ST-3 returns filed by M/s Navgujarat for the said year that the taxable value for the period April’08 to Sept’08 is Rs. 1,12,05,418/- and the taxable value for the period Oct’08 to Mar’09 is Rs. 1,82,56,460/-. Thus the total taxable value for the year 2008-09 is Rs. 2,94,61,878/- (Rs. 1,12,05,418/- + Rs.
1,82,56,460/-) leaving a difference of Rs. 1,938/- which pertains to bill No
Sulphur T- 1B dated 31.3.2009 as seen from the list of bills attached with the ledger. Similarly, the period from 1.4.2009 to 31.3.2010, M/s Navgujarat had issued invoices for cargo handling charges and transportation charges having total taxable value of Rs. 4,47,83,670/-. I find from the two ST-3 returns filed by M/s
Navgujarat for the said year that the taxable value for the period April’09 to
Sept’09 is Rs. 1,05,36,544/- and the taxable value for the period Oct’09 to Mar’10 is Rs. 3,37,83,806/-. Thus the total taxable value for the year 2009-10 is Rs.
4,43,20,350/- (Rs. 1,05,36,544/- + Rs. 3,37,83,806/-) leaving a difference of Rs.
4,63,320/- which pertains to bill No GP-T3A dated 30.3.2010 and bill No. GP-
T3B dated 30.3.2010 for Rs. 4,56,192/- and Rs. 7,128/- respectively as seen from the list of bills attached with the ledger. Service tax is required to be paid on receipt of amount whereas, ledgers are maintained on accrual basis which explains the difference due to the above three bills, the tax on which is payable on receipt of the bill value. In view of the above, I find that service tax on the entire value on receipt basis for the period from 16.5.2008 onwards has been correctly paid by
M/s Navgujarat.
16.9 In view of the above, the demand of Rs. 1,92,38,781/- is not sustainable.
Consequently, the proposal for imposition of penalty and recovery of interest also do not survive.
17. Accordingly, I pass the following order:
O R D E R
I drop the proceedings initiated against M/s Navgujarat vide SCN F.No.
STC/4-87/O&A/10-11 dated 18.10.2010.
-SD/- 9.1.2012
(A.K.Gupta)
Commissioner,
Service Tax, Ahmedabad.
F.No.STC/4-87/O&A/10-11 Date: 09.01.2012.
BY RPAD
To,
M/s Navgujarat C.F.S.Agency,
Navin House, Opp. Sardar Patel Hall,
Off. C.G.Road, Navrangpura, Ahmedabad-380 006.
Copy to :
1.
The Chief Commissioner, Central Excise, Ahmedabad Zone, Ahmedabad.
2.
Assistant Commissioner of Service Tax, Audit, HQ, Ahmedabad.
3.
The Assistant Commissioner of Service Tax, Division-II, Ahmedabad.
4.
The Superintendent of Service Tax, Range-VIII, Divn.II , Ahmedabad.
5.
Guard File.

28