2 OIO No. 25/STC/AHD/ADC(JSN)/2013-14

BRIEF FACTS OF THE CASE :

1.  M/s Ajay Transport, Ahmedabad having Service Tax Registration NO:ADKPN3442LST001, ONGC Vendor Code 121863, 197/3, Near Swati Auto link, beside Sardar Patel Ring Road, Chandkheda-Kalol Highway, Chandkheda, Ahmedabad - 382 424 (here in after referred to as the said assessee/noticee, for the sake of brevity), are engaged in supplying vehicles on Hiring to M/s ONGC-Ahmedabad-Asset, but not paying appropriate service tax payable thereon under "Supply of Tangible Goods Service" as specified under Section 65 (105) (zzzzj) of the Finance Act, 1994. The said assessee is also engaged in providing Goods and Transport Services.

2.  The case was investigated by the Directorate General of Central Excise Intelligence, (here-in-after referred to as DGCEI for the sake of brevity), Ahmedabad Zonal Unit, Ahmedabad (AZU) for the period 16/05/10 to 31/03/10 and found that the said assessee was/ is supplying Tankers (Fluid Tankers) under the contract to perform carriage of fluid such as mud, brine, effluent, technical water etc. From operational base to worksite / worksite to worksite in the oil field conditions prevailing at the worksite / Working areas of Ahmedabad-Asset. The work also includes loading / unloading of fluids into / from the tanker(s) by means of fighter pump attached with the tanker as and when required for services by hiring them on monthly fixed charges basis to the assets of M/s ONGC, Ahmedabad-asset. In such cases, the said assessee is rendering the services of "Supply of Tangible Goods" and not "Goods Transport Agency Services", as they were not providing the service of transportation of goods and also not issuing any LR or Consignment Note for goods transported by M/S ONGC in hired vehicle as required under sub clause 50b of section 65 of the Finance Act, 1994. The said assessee issue only monthly bills for hiring charges for vehicles supplied to M/s ONGC on hire under the agreements. The said assessee has not been paying service tax on such hiring charges collected from M/s ONGC.

3.  Whereas, it appeared that the said assessee are liable to pay service tax on such hiring charges under 'Supply of Tangible Goods'. However, it was observed that M/s ONGC is paying service tax on 25% of such hiring charges by availing abatement under GOODS TRANSPORT AGENCY service. Accordingly, it appeared that service tax is being paid only on 25% of the gross value whereas the said assessee are liable to pay service tax under the category of SUPPLY OF TANGIBLE GOODS [STG] services on full value without any abatement on the value.

3. Whereas it appeared that service provided by said assessee is classifiable under Supply of Tangible Goods instead of Goods Transport Agency.

3.1 The relevant definitions under GOODS TRANSPORT AGENCY services and SUPPLY OF TANGIBLE GOODS services are reproduced below:-

a. Definition of taxable service viz. "GOODS TRANSPORT AGENCY” Services under sub clause [zzp] of clause 105 of section 65 of the Finance Act, 1994:-

'to a customer, by a goods transport agency, in relation to transport of goods by road In a goods carriage;'

b. Definition of service provider viz 'GOODS TRANSPORT AGENCY' sub clause 50(b) of section 65 of the 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'

c. Definition of taxable service viz. 'SUPPLY OF TANGIBLE GOODS' services under sub clause (zzzzj) of clause 105 of section 65 of the Finance Act, 1994:-

"to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances;’

3.2 As per the definition of 'Goods Transport Agency' service, issue of 'Consignment Note' by GTA is mandatory. Thus the important and mandatory condition for GTA services is issue of "Consignment Note' in whatever form. Accordingly, it can be said that 'Goods Transport Agency' service is mainly based on transportation of consignments of goods. Further, in Goods Transport Agency service, gross value of services provided are also valued and charged on the basis of quantum of the consignment [goods] transported. The wordings of Notification No. 34/2004 whereby value based exemption for each consignment is given under sub para [i] and [ii], also supports the view that consignment to be transported is an essential part of 'Goods Transport Agency' service.

3.3 As per para 4.5 of Board's circular No.:79/9/2004- dated 17-12-2004, Goods Transport Agency are required to issue a Consignment Note and the said Consignment Note should be serially numbered and should contain the name of consigner and consignee, registration Number, place of origin destination and person liable for paying service tax.

4. Where as it appeared in the said assessee’s case, they are not fulfilling any of the above condition relevant for classifying the service under GTA service. The said assessee supply the vehicles to M/s ONGC on hire for their usage as per the terms and conditions of M/s ONGC under an agreement. At the time of agreement the said assessee does not know the type of goods that will be transported and the hiring charges are decided not on the basis of the quantum of goods to be transported in future. The hiring charges are fixed based on duration of supply of the vehicle. In these case M/s ONGC may use that vehicle or may not use the vehicle but fixed hiring charges will be paid to the service provider. The right of possession of vehicles i.e. ownership of the vehicle has not been transferred to M/s ONGC Ltd. The said assessee on the hiring charges received has not paid any VAT. Accordingly, it appears that the assessee has fulfilled all features of the definition of "Supply of Tangible Goods services".

5. The benefit of exemption from payment of service tax under Notf. No. 1/2009 ST dated 05-01-2009 to the said assessee under Supply Of Tangible Good services also appears to be not available in light of the fact that M/s ONGC is not a receiver of GTA services,

6. Whereas it appeared that the amount recovered against such supplying of vehicles is liable for service tax under the category of taxable service 'Supply of Tangible Goods for use Services' under Section 65 [105] [zzzzj] of the Finance Act, 1994. Accordingly, M/s Ajay Transport, Ahmedabad was required to pay service tax on the amount recovered by them in the name of Transportation Charges' which they had not paid.

7.1. Statement of Shri Rajendra Prahaladbhai Nayak, partner of M/s Ajay Transport, 197/3 near Swati Autolink, besides Sardar Patel Ring Road, Chandkheda-Kalol Highway, Chandkheda, Ahmedabad - 382424., was recorded under section 14 of the Central Excise Act, 1944 before the Superintendent of Central Excise, Directorate General of Central Excise Intelligence, Ahmedabad Zonal Unit, Ahmedabad on 16-09-2010.

7.2. On being asked he had stated his personal Bio-Data and further stated that his firm was in the business of transportation and hiring of fluid tanker for the last six years, at present, they are two partners, one is himself and the second partner is Smt Pritamaben M Nayak, she is his sister-in-law, he was in complete control of the whole business of the firm and active partner in their family partnership business. They have 22 fluid tankers and are mostly on contract service with ONGC, Ahmedabad assets, at present, his firm is having no business with other companies, firms or individuals and all their fluid tankers were engaged with ONGC Ahmedabad assets. He took all policy decision of the firm and he is/was the final authority.

7.3. On being asked , about the existence of agreement / contract between his firm and ONGC, he stated that his firm entered into agreement with ONGC before hiring of their fluid tankers, he produced Notification of award for hiring of fluid tankers dated 31-05-2007, 20-07-2007, and 17-07-2010. According to the said agreement, his firm was required to give certain specified number of fluid tankers to ONGC. These fluid tankers had to be supplied as per the specification and requirement of the ONGC. As per the condition of agreement/contract Driver of the Vehicle must at least have two years driving experience on such vehicle, the vehicle should also have one cleaner, his firm had to pay for the cost of the fuel, driver and cleaner but the vehicle was in total control of ONGC and all instructions for the location of deployment of tankers shall be issued by DGM (Logistics.), Sabarmati Complex, Ahmedabad assets, Ahmedabad, on their direction jobs were performed for the day, the tankers have to handle crude oil and water belonging to ONGC from one place to another place of ONGC assets. In the evening, they receive work performance report of each vehicle. Based on this work performance at the end of the month his firm prepared a single Bill for the month, his firm receives payment within 30 days from the date of issue of the Bill. Full payments are made on the Bill amount as the same is as per the performance and as per contract/ agreement.

7.4. On being asked regarding service tax registration and payment thereof he stated that as per the agreement/contract payment of service tax is being discharged by ONGC on the basis of their Bill submitted. On being further asked about issue of consignment note, he stated that his firm only issues monthly Bill prepared based on work performance reported by ONGC.

7.5. He further stated that his firm has not paid any service tax on the amount received from ONGC, as his firm was unaware about payment of service tax on hiring of fluid tanker to ONGC, which is rightly covered under the definition of taxable service viz. 'SUPPLY OF TANGIBLE GOODS' services introduced from 16-05-2008. Nonpayment of service tax would be brought to notice of the ONGC as they have undertaken to pay service tax as per the agreement,

8. The scrutiny of the Contract / Agreement, correspondence and statement recorded reveals the following facts regarding the nature of service provided by the said assessee:

9. M/s Ajay Transport, Ahmedabad has not paid VAT/Sales tax on the amount recovered from ONGC-asset. This amount was recovered on the basis of the Bill raised for Hiring of Tankers on monthly basis.

10. Whereas it appeared in the said assessee's case, they are not fulfilling any of the conditions relevant for classifying the service under GTA services. The said assessee supply the vehicles to M/s ONGC on hire for their usage as per the terms and conditions of M/s ONGC under an agreement. At the time of agreement the said assessee did not know the type of goods that would be transported and the hiring charges are decided not on the basis of the quantum of goods to be transported in future. The hiring charges are fixed on the basis of duration of supply of the vehicle. In these case M/s ONGC may use that vehicle or may not use the vehicle but fixed hiring charges will be paid to the service provider. The right of possession of vehicles i.e. ownership of the vehicle has not been transferred to M/s ONGC Ltd. The said assessee on the hiring charges received has not paid any VAT. In the said assessee case, it goes to prove that the Tankers are handled by the ONGC, Ahmedabad-asset for their own material transfer and they are in total control of the hired Tankers. As per contract / agreement M/s ONGC may use that vehicle for reasons whatsoever or may not use the vehicle but fixed hiring charges will be paid to the service provider. Accordingly, it appears that all features of the definition of "Supply of Tangible Goods services" has been fulfilled in the said assessee's case as against satisfying the features of the definitions of Goods Transport Agency services.

Condition of Agreement or Notification of Award :-

No:AMD/MM/ASSETS/SC/33/2009-10 dated 17-07-2010, for 15 crude oil tankers for a period of three years & No:AMD/MM/ASSEST/SC/81/BP/2010-11/P-7 (A) dated 28/02/2011 valid for a period of 180 days, for 11 crude oil tankers.

M/s Ajay Transport, Ahmedabad the Notification of Award for hiring the services of Tankers in accordance with the technical specifications and scope of work of tender document. Some of the important conditions of the contract are as under:

i. The services under the contract is to perform carriage of fluid such as mud, brine, effluent, technical water etc. From operational, base to worksite / worksite to worksite in the oil field conditions prevailing at the worksite / Working areas of Ahmedabad-Asset. The work also includes loading / unloading of fluids into / from the tanker(s) by means of fighter pump attached with the tanker as and when required for services by hiring them on monthly fixed charges basis to the assets of M/s ONGC, Ahmedabad-asset.

ii. M/s Ajay Transport (Contractor) shall provide specified number of Tankers with driver and helper under the contract, hired by ONGC on dedicated monthly basis.

iii. The vehicles provided under the contract must confirm to the prescribed technical specification and manned by a competent driver and other required manpower as mentioned in the contract. All the valid and up-to-date vehicle documents relating to its registration, road-tax payment, fitness, permit, insurance, PUC, Fire extinguisher, Reverse horn etc. must be available in the vehicle. The vehicle should also be equipped with suitable spare wheel and required tools like Jack, spanner etc.

iv. After successful inspection/acceptance, ONGC shall place work order with the contractor for placement of vehicle for duty. Contractor shall place the accepted vehicle for duty as per the date mentioned in the work order.