CESTAT Ahmedabad Quashes Service Tax Demand, Finds Composite H&T Contract Could Not Be Split For GTA Levy

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside service tax demands of over ₹51 lakh raised against Central Warehousing Corporation.

The tribunal held that the Revenue could not levy service tax under the Goods Transport Agency (GTA) category by splitting a composite handling and transportation (H&T) contract.

A bench of Judicial Member Somesh Arora and Technical Member Satendra Vikram Singh allowed the appeals.

The dispute arose after the Department claimed that Central Warehousing Corporation was liable to pay service tax under the reverse charge mechanism on transportation charges separately shown in invoices raised by its handling and transportation contractors.

The contractors discharged service tax on the cargo handling component of the composite contracts but separately reflected transportation charges in their monthly invoices, stating that the recipient was liable to pay service tax on that portion under the reverse charge mechanism.

Based on this bifurcation, the adjudicating authority confirmed service tax demands of more than ₹51 lakh, along with interest and penalties. The Commissioner (Appeals) upheld those orders.

Before the tribunal, Central Warehousing Corporation argued that the contracts covered transportation, loading, unloading, stacking and other incidental activities as part of a single cargo handling arrangement. It contended that the contractors had wrongly split the invoices and that the services could not be classified as GTA services, particularly because no consignment notes had been issued.

The tribunal examined the tender conditions and noted that transportation was only one component of the composite contracts, which also required handling and other incidental operations.

It further observed that issuing a consignment note is an essential requirement for classifying a service as a Goods Transport Agency service. The contractors, however, had issued only consolidated monthly invoices.

The tribunal observed, “When H&T contractors of the appellant have not issued any consignment note, service cannot be classified under GTA service. The agreement entered into between the appellant and their contractors also reveals that service agreed upon between them was Cargo Handling Service.”

Following its earlier decision in the appellant's own case, the tribunal held that the H&T contractors had unnecessarily vivisected the consideration amount into cargo handling and GTA components. It concluded that Central Warehousing Corporation was not liable to pay service tax under the reverse charge mechanism.

The tribunal accordingly set aside the impugned orders and allowed both appeals.

For Appellant: Rahul Patel, Chartered Accountant

For Respondent: M.P. Solanki, Assistant Commissioner (AR)