Commissioner of GST and Central Excise ...Respondent Trichy Commissionerate, No. 1, Williams Road, Cantonment, Trichy 620 001. APPEARANCE: For the Appellant : Mr. G. Natarajan, Advocate For the Respondent : Mr. Anoop Singh, Authorised Representative HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL) FINAL ORDER No. 40764 / 2025 DATE OF HEARING : 04.02.2025 DATE OF DECISION : 28.07.2025 Per Mr. VASA SESHAGIRI RAO This Appeal No. ST/40865/2021 has been filed by M/s. Bharat Heavy Electricals Ltd. (HPBPSSTP), Trichy (hereinafter referred to as the "Appellant") assailing the OrderinOriginal No. 10/COMMR./ST/2021 dated 20.09.2021 passed by the Commissioner, CGST & Central Excise, Trichy 2 ST/40865/2021 confirming the demand of service tax along with interest besides imposed penalty under the provisions of the Finance Act, 1994. 2. The issue in this Appeal is whether the demand of service tax has been rightly confirmed on Freight Income as shown in their financial records which was incurred by the Appellants but also reimbursed by its customers. 3. The Appellant is a Public Sector Undertaking engaged in the manufacture of Boilers, Valves etc., and is also engaged in the erection and commissioning of power plants, Boilers etc., and also rendering various services and paying service tax under forward charge for various taxable services like Erection, Commissioning and Installation service, Maintenance & Repair services, Works Contract services, etc. and are also registered under RCM and paying service tax as service receiver under reverse charge for some services like Goods Transport Agency Service. The recipient of the Transportation Service is Nabinagar Power Generating Company Pvt Ltd. (NPGCL) which is a Joint Venture between NTPC and Bihar State Electricity Board. 4.1 During the Audit of accounts of the appellant, and on scrutiny of the financial records, it was noticed that 3 ST/40865/2021 the Appellant had not paid service tax on the income received on account of facilitation of freight. Information was called for from the appellant regarding the payment for freight. In response, the appellant informed that they have received an amount of Rs.87,82,58,742/ and Rs.23,86,84,057/ during the periods 201617 and 201718 (up to June, 2017) respectively and booked as freight income in the financial records and that no service tax is payable on the said amounts as they are not a "Goods Transportation Agency" and the activity of transportation of goods is undertaken by them through their contractors/vendors and due service tax has been discharged thereon. 4.2 The appellant has also submitted the Contract agreement CS0370102(r)2SCCOA05 dated 21.02.2013 entered between the appellant and the Nabinagar Power Generating Co Pvt. Ltd for the supply of goods and contract no CS030102(r)2 TC COA06 dated 21.2.2023 for the supply of services. The details of the services are shown in the Table below: Sl. No. Scope of Supply Supply value (Rs.) Local transportation including port 59,01,19,530 1 clearance and Port charges and Inland insurance charges for plant and equipment, covered under First contract and Second contract 4 ST/40865/2021 2 Local transportation charges including 3,15,28,231 port clearance and port charges and Inland insurance charges for mandatory spares under First contract and second contract 3 Installati