Case-K.M. Trans Logistics (P.) Ltd [2020] 117 taxmann.com 609 (AAAR-RAJASTHAN)
1. Facts:
Appellant is engaged in providing transport services to various manufacturers of motor vehicles for carrying their vehicles from factory to various cities in India where authorised dealers are located. The appellant stated that goods will be transported using its own vehicles/lorries under E-way Bill Rules but there will be no generation of consignment note and therefore, is claiming that the services are out of the purview of GST and will categories as non-taxable service.
2. Brief about the ruling of AAR:
Appellant had filed application Rajasthan Authority for Advance Ruling and sought Advance Ruling on whether Transportation by own vehicles on the basis of Invoice(s) and E-way Bill without issuing consignment note by Appellant Transporter will covered under exempted supply/non-GST supply.
It was held that to issue an E-way bill, it is mandatory to mention transport document number in Part A8 of EWay Bill. Without mentioning the same, e-way bill cannot be issued therefore it is mandatory for GTA to issue transport document and without issuing LR/GR/consignment note, goods cannot be transported. Therefore, contention of applicant of providing service without issuing LR/GR/consignment note is not correct and is not acceptable. In view of facts examined above, we find that applicant is a GTA service provider under GST Act and is not exempted from paying GST and thus liable to pay GST as provided under Notification No. 11/2017- Central Tax (Rate), dated 28.06.2017 (as amended) read with Notification No. 13/2017- Central Tax (Rate), dated 28.06.2017 (as amended).
3. Grounds of Appellant-
E-Way Bill format nowhere requires mandatory mentioning of Consignment Note No./LR/GR. Therefore, there is no requirement of mandatory issuing consignment note or LR/GR by transporter. E-Way Bill can be generated without generating Consignment note/LR/GR. Presently E-Way Bills are generated on GST portal without mentioning of Consignment note/LR/GR. The finding of Advance Ruling that without issuing Consignment note/LR/GR goods cannot be transported or E-Way Bill cannot be issued is wrong as practically on GST portal E-Way Bills are being generated without having consignment note/LR/GR. Since there is no consignment note issued, thus, the services are out of the purview of GST and will categorize as non-taxable service/non-GST supply.
4. Observation by AAAR-
a) Failure of Appellant to mention scope of activity, failure to provide agreement between consignor and consignee, failure to highlight why appellant would not be issuing any consignment note, Thus decision given by AAAR on the basis of whatever information available on record
- Appellant has not mentioned specifically about the exact scope of activities-
Appellant has simply stated that they will be transporting raw material to some exporting units. Except for this bare information, nothing has been mentioned by the appellant in the appeal to describe the exact nature of the activity proposed to be undertaken and the parties involved in the proposed activity. The relevant extract of the judgement is as follows:
“Except for this bare information, nothing has been mentioned by the appellant in the appeal to describe the exact nature of the activity proposed to be undertaken and the parties involved in the proposed activity”.
- Appellant neither specified scope of agreement between consignor and consignee and not they specified why they would not be issuing consignment note-
The proposed agreement containing details of responsibilities and rights of the parties to the agreement have not been submitted by appellant. They have also not explained as to why they will not be issuing the consignment notes especially when they are already in the similar business of transportation, through transportation of motor vehicles. The relevant extract of the judgement is as follows:
“The proposed agreement containing the details of the responsibilities and rights of the parties to the agreement have not been submitted by the appellant. They have also not explained as to why they will not be issuing the consignment notes especially when they are already in the similar business of transportation, through transportation of motor vehicles.”
The above information does not include information as to the consignor or consignee of the goods, whether they are different or the same persons and which of them will be entering into agreement with the appellant.
The peculiar fact mentioned by them is that they will not be issuing consignment note but they have not explained as to why they will not be issuing the consignment notes and what will be the document which will govern the terms of the transaction between the service provider and the service recipient.
- Appellant only emphasized that they would not be issuing consignment note and failed to provide any other document regarding scope of the agreement-
The appellant emphasized upon the fact that they will not be issuing consignment notes. Further, they have not mentioned the details of consignor and consignee of goods; rather they have simply stated that the activity will involve transportation of raw material for the exporting units. The relevant extract of the judgement is as follows:
“The above information does not include information as to the consignor or consignee of the goods, whether they are different or the same persons and which of them will be entering into agreement with the appellant.”
“The peculiar fact mentioned by them is that they will not be issuing consignment note but they have not explained as to why they will not be issuing the consignment notes and what will be the document which will govern the terms of the transaction between the service provider and the service recipient.”
- Appellant although mentioned that they are engaged in transportation of goods by road, but again they have not provided any details of other activities required for completing the main activity-
The main activity involving vehicles of the appellant which will be used for transport of goods by road has been mentioned by appellant in appeal but they have mentioned nothing about any other activities which may be required in connection with the main activity of the appellant. In that case, such other activities will be covered under ‘Supporting services in transport’ mentioned at SL. No. 11 of Notification No. 11/2017-Central Tax (Rate) Date 28-6-2017 (as amended from time to time), as the case may be, as per the exact nature of activities undertaken or services provided by them. The relevant extract of the judgement is as follows:
However, the appellant has emphasized upon the fact that they will not be issuing consignment notes. Further, they have not mentioned the details of consignor and consignee of goods; rather they have simply stated that the activity will involve transportation of raw material for the exporting units.
The main activity involving vehicles of the appellant which will be used for transport of goods by road has been mentioned by the appellant in the appeal but they have mentioned nothing about any other activities which may be required in connection with the main activity of the appellant.
- Decision by given by AAAR on the basis of whatever information available on record since the appellant failed to produce relevant information-
In order to ascertain exact nature of services to be provided by the appellant, examination of the contract/agreements between the appellant and service recipients is necessary. However, since no copy of agreement/contract was produced by the appellant or his authorized representative for examination, the case was decided on the basis of whatever information has been provided and the nature of services i.e. Goods transport services Rental services of transport vehicles, Supporting services in transport etc. will be decided based on the information submitted. The relevant extract of the judgement is as follows:
“However, we find that since no copy of agreement/contract produced before us by the appellant or his authorized representative for examination, the case is being decided on the basis of whatever information has been provided and the nature of services i.e. Goods transport services Rental services of transport vehicles, Supporting services in transport etc. will be decided based on the information submitted.”
b) Observation by AAAR from the webportal of Appellant-
It was observed by AAAR that the appellant is claiming on its official website (www kmtrans.in) that they are serving about 90% of car makers viz. Maruti Suzuki, Toyota, Tata, Hyundai, Mahindra etc., and are having Fleet Size of 1250, 35 branch offices, 32 loading stations, 80 service support. From this, it is clear that the appellant transporter is not from unorganized sector of transporters and has a vast network all over India for transportation of goods. They are providing services to various manufacturers of motor vehicles involving transportation of motor vehicles which are carried from the factory to the various cities in India where the authorised dealers are located.
c) Pre-requisites of any activity falling under GTA Services
- Issuance of Consignment Note and transfer of lien on goods from consignor to transporter and transporter of goods becoming responsible for transportation of goods till its safe delivery to the consignee –
It was observed by AAAR that consignment note is a document issued by a GTA against receipt of goods for the purpose of transporting goods by road in a goods carriage. Where a consignment note is issued, it implies that lien on the goods has been transferred and transporter of goods becomes responsible for transportation of goods till its safe delivery to the consignee. In such a situation, consignment note or any other document, by whatever name called, is simply a document showing the responsibility of the transporter and the rights of the persons for whom the goods are transported. By implication, it means that the transporter undertakes the responsibility to transport the goods and promises safe delivery of the goods at the destination. A consignment note is only a document by which the responsibilities and rights are reduced in writing and, therefore, existence or for that matter, absence of the said document cannot have any adverse effect on the responsibilities or rights as agreed between the parties. Further, consignee or consignor of the goods, whom services are provided, gets certain rights which can be exercised against the transporter in respect of transportation of the goods.
- Nomenclature of document is immaterial provided lien on the goods is transferred-
Ideally transporter issues document called consignment note or LR/GR etc. The document may be called anything but the rights and responsibilities of the Parties are governed by such document in the common trade practice. The activities as described by the appellant are those undertaken by a goods transport agency as can be seen from the brief description provided by them
d) Left with no other option, AAAR held the services provided by the appellant may fall under rental services in certain circumstances in case they would not be falling under GTA Services-
It can also be inferred that appellant will be providing their own vehicles either to raw material supplier or to exporting units for use in the transportation of goods which is raw material for the exporting units. In that case, appellant will be carrying out an activity which is in the nature of ‘rental services of transport vehicles with or without operators’, as can be inferred from submissions made by appellant. This conclusion also finds support from vehement argument of the appellant that they will not be issuing consignment notes. The relevant extract of the judgement is as follows:
“However, we find that since no copy of agreement/contract produced before us by the appellant or his authorized representative for examination, the case is being decided on the basis of whatever information has been provided and the nature of services i.e. Goods transport services Rental services of transport vehicles, Supporting services in transport etc. will be decided based on the information submitted.”
e) Appellant either engaged in GTA Services or Rental Services–
In the process of transportation of goods since appellant coming from organised sector, two types of services either by way of activity described as goods transport agency services or by way of rental services of transport vehicles can be provided. In the instant case of the appellant, if lien of the goods is transferred and the appellant becomes responsible for goods till its safe delivery to the consignee, services will be classifiable as goods transport agency services and issuance of consignment note or its non-issuance does not make any difference so far as the nature of the activity carried out by them is concerned. Mere non-issuance of the consignment note in such cases does not make them entitled for exemption from payment of GST. However, if the vehicles are provided to the client on rental for use as per their requirement, the services will be classifiable as rental services of transport vehicles’.
f) E-Way Bill format has no connection with deciding the liability of the appellant-
It was observed by AAAR that format of E-Way Bill, in whatever manner designed or amended, is not relevant for deciding the classification of the activity carried out by them. The nature of activity carried out by them is independent of format of E-Way Bill rather E-Way Bill format has no connection whatsoever, with the nature of activities undertaken. In any case, mere non-requirement of mentioning of any detail in E-Way Bill does not affect liability of payment of GST on any service unless the service has been exempted through an exemption Notification issued by the Government.
5. Held:
It was held by AAAR that services provided by appellant will be liable to payment of GST as specified under Notification No. 11/2017- Central Tax (Rate) dated 28-6-2017 (as amended) read with exemption Notifications, under the services relating to transportation of goods or rental services of transport vehicle including supporting service, depending upon the exact nature of activity to be carried out by them.
6. Comment
There are three significant things coming out of the above decision of AAAR and which at a point relief to the assessee but at the same time indicates something critical about the entire process of AAR/AAAR. The three critical pointers coming from the decision are as follows
1. A Major relief that E-Way Bill format has no connection with deciding the liability-
This is one of the major reliefs coming from judgement that E-Way Bill, in whatever manner designed or amended, is not relevant for deciding the classification of the activity carried out by them. There was an apprehension subsequent to the judgement of AAR that huge liability on assessee might be fixed treating the E-Way bills as consignment note. However, judgement comes as a relief and holds forth that the actual liability depends on the nature of transaction i.e. “substance” prevails over the “form”.
2. Purpose of issuing consignment note indicates lien on goods has been transferred to the transporter and transporter becomes responsible for goods till its safe delivery to the consignee-
The observation of AAAR regarding taxability of GTA Services was in line with the E-Flyer issued in respect of GTA Services and judgement in the matter of Balasubramanyam Saravana Perumal [2019] 111 taxmann.com 507 (AAR – ANDHRA PRADESH) wherein it was provided that If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee. It is only the services of such GTA, who assumes agency functions, that is being brought into the GST net. Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA. As a corollary, the services provided by such individual transporters who do not issue a consignment note will be covered by the entry at s.no.18 of notification no.12/2017-Central Tax (Rate), which is exempt from GST.
3. Basic Purpose of AAR/AAAR gets defeated if the relevant information is not produced and authorities have to give decision on half-baked information and also become a major headache for other players in the same field and recipients to the services of that sector-
Its prominent to note that AAAR has multiple times observed that appellant did not mention about scope of activity, failed to provide agreement between consignor and consignee, failed to specify why appellant would not be issuing any consignment note. Therefore, AAAR had to specifically mention in their judgement that
“However, we find that since no copy of agreement/contract produced before us by the appellant or his authorized representative for examination, the case is being decided on the basis of whatever information has been provided and the nature of services i.e. Goods transport services Rental services of transport vehicles, Supporting services in transport etc. will be decided based on the information submitted.”
It would be apt to highlight that decision was given on whatever information was available on record. Although, its not clear that whether AAAR had to visit webportal of appellant due to insufficient information or otherwise, but inability to provide documents by applicant forces one to ponder that why at all application was filed before AAR/AAAR when applicant did not intend to provide complete information.
Forcing the authorities to given decision on half-baked information not only works against appellant but also against other players of sector and also against all recipients to services of that sector. The matter is not about high tax burden or lower tax burden because either way, it goes against the basic intention of legislature. Authorities in such cases are left with no option since it was an appeal against the decision of AAR and they had to give a decision on the appeal filed.
Further, since assessment proceedings have not yet started in GST till date and Tribunal has not been constituted, decisions of AAR/AAAR set the benchmark for common tax payers to decide about their liability and decisions based upon incomplete information provided is the last thing one needs to see in those decisions.
