TUTICORIN ALKALI CHEMICALS AND Vs. CCE

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, we come across a challenge by the assessee to a demand of service tax of over Rs. 81 lakhs and Education Cess of about Rs. 1.6 lakhs as also to penalties imposed under various provisions of the Finance Act, 1994. The above demand of service tax is in respect of Goods Transport Agency (GTA) service availed by the appellants for transportation of their inputs viz. salt, coal and lime to factory. Among these inputs, salt was indigenously procured while the other two were imported. It is the case of the appellants, reiterated today by their counsel, that, in respect of transportation of salt, they did pay service tax with interest after availing the benefit of abatement under Notification No. 35/2004 -ST. It is submitted that the relevant TR.6 challans evidencing such payment are available on record. Nevertheless, in adjudication of the relevant show -cause notices, ld. Commissioner has demanded service tax in respect of the GTA service availed for transportation of salt also. According to ld. counsel, this demand would amount to over Rs. 50 lakhs. As regards the other two inputs transported from the seaport to the factory, it is the case of the appellants that this transportation was undertaken as part of a turnkey contract and, therefore, no service tax was payable in the GTA category. If at all any tax was payable, it was payable only by the transporter. In this connection, ld. counsel has referred to the relevant purchase order, invoice etc. This claim is contested by ld. SDR who submits that, in terms of Rule 2(1)(d)(v) of the Service Tax Rules, 1994, the appellants are liable to pay service tax on the amount covered by the turnkey contractor's invoice and paid by the appellants. In his rejoinder, ld. counsel submits that their factory was closed early last year and that they have acute financial hardships.

(2.) AFTER considering the submissions, we have found prima facie case for the appellants against the demand of service tax on freight incurred in the transportation of salt. It appears, they paid service tax in the same category (GTA service) in relation to the transportation of this input, which is evidenced by TR6 challans. Of course, they have availed the abatement allowed to GTA service under Notification No. 35/2004 -ST. The impugned demand is also in the category of GTA service and hence such abatement would prima facie be admissible to the appellants. However, as regards the transportation of the other inputs from port to factory, it appears that this was undertaken by M/s. South India Corporation (Agency) Ltd. (SICAL, for short) as part of a turnkey contract. The relevant purchase order indicates that the appellants paid an amount of Rs. 4000/ - per container for multifarious services including loading, transportation, unloading etc. Transportation from port to factory is specifically indicated in the category of services mentioned in the purchase order. It appears that the major component of the contracted work was transportation of the cargo from port to factory. Neither the appellants nor their counsel has shown us any authority granting exemption from payment of service tax on this freight comprised in turnkey contract. The modus operandi of the appellants seems to have been to evade payment of service tax on GTA involved in the subject activity. The service tax demanded works out to nearly Rs. 32 lakhs. Contextually, it is noted that a part of the transportation was undertaken through railways, which is not covered by the GTA service. According to ld. counsel, demand to the extent of Rs. 10 lakhs is covered by the railway freight. If that be the case, the demand which is prima facie sustainable in relation to transportation of coal and lime by road from port to factory would be around Rs. 20 lakhs. Taking into account the plea of financial hardships, we direct the appellants to deposit 50% of this amount for the purpose of Section 35F of the Central Excise Act.

(3.) ACCORDINGLY , the appellants shall deposit Rs. 10,00,000/ - (Rupees Ten lakhs only) within 4 weeks and report compliance on 24.4.2008.