Differentiation between "Clearing and Forwarding Agent Services" and "Goods Transport Agency Services"
Tribunal rules transportation charges as distinct from clearing and forwarding services, dismisses extended period demand and penalties.
In a significant judgment, the Customs Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, Principal Bench, has ruled in favor of Ridhi Sidhi Logistics, dismissing the demand for service tax amounting to Rs. 43,15,181/- on transportation charges, and setting aside associated penalties. The decision, delivered on September 12, 2025, affirms that transportation services, when provided separately, cannot be included in the taxable value of clearing and forwarding services.
The Tribunal, comprising Dr. Rachna Gupta, Member (Judicial), and Ms. Hemambika R. Priya, Member (Technical), evaluated the appeal against the Order-in-Appeal dated August 6, 2018, which had upheld the service tax demand. Ridhi Sidhi Logistics had contested the classification and taxability of services provided to Parle Biscuits Pvt. Ltd. and Parle Products Pvt. Ltd., arguing for separate treatment of transportation services under the 'Goods Transport Agency Services.'
The judgment clarifies that under Section 65B(26) of the Finance Act, 1994, transportation of goods by road qualifies as a distinct service from clearing and forwarding operations. The Tribunal noted that Ridhi Sidhi Logistics correctly discharged service tax liability under separate heads for services provided. Furthermore, the reimbursement of transportation charges under separate agreements was not considered part of the consideration for clearing and forwarding services, thereby validating the appellant's availing of abatement under Notification Nos. 13/2008-ST and 26/2012-ST.
The Tribunal also addressed the issue of limitation, ruling against the invocation of the extended period under Section 73 of the Finance Act, 1994. It concluded that the demand was unsustainable beyond the normal period of limitation, as Ridhi Sidhi Logistics had regularly filed returns and there was no suppression of facts or conscious withholding of information.
In its detailed analysis, the Tribunal distinguished between 'clearing and forwarding operations' and transportation services, underscoring that the latter, if provided independently, does not fall under the category of clearing and forwarding agent services. Citing several precedents, including Coal Handlers Pvt Ltd. v. Commissioner of Central Excise and Commissioner of Central Excise v. M/s. Kulcip Medicine (P) Ltd, the Tribunal reinforced the principle that transportation services must be assessed based on specific descriptions as per Section 65A(2) of the Finance Act, 1994.
The judgment is expected to have broader implications for logistics companies and their taxation practices, particularly in cases involving separate agreements for transportation services. Legal experts suggest that this ruling could provide clarity and relief to businesses facing similar service tax demands.
With this decision, Ridhi Sidhi Logistics successfully overturned the previous order, ensuring that their operations continue without the burden of the disputed service tax liability. The Tribunal's ruling not only provides relief to the appellant but also sets a precedent for handling similar disputes in the logistics sector.
