Update on importance of consignment note in determining tax liability 114/2020-21

The issue regarding issuance of consignment note by GTA for levying tax has been matter of dispute since erstwhile indirect tax regime as there were contrary decisions rendered by courts. This confusion is continued in GST regime as well as recently, advance ruling was filed by M/s Uttarakhand Forest Development Corporation before AAR to seek answer as to whether they are liable to pay GST under reverse charge mechanism on services of transportation availed by unregistered transporters when no consignment note was issued to them. The decision of AAR is the subject matter of discussion in our present update.

As per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017,” 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. In the present case, the applicant is a Government body constituted under State Assembly of Uttarakhand State and is sole agency for removal and sale of forest produce from the entire forest area in Uttarakhand. The applicant after felling trees gets timber transported to its sale depots. For this purpose, the applicant hires truck transporter from open market accordingly as per availability of vehicles and get transported to its sales depot from road head. Due to unique nature of goods, the applicant itself fills Form 2.1 for transportation of goods which is called “Ravana”. Form 2.1 is printed format of applicant to transport timber from one place to another which carries details of material, vehicle no., name of driver & signature & other details. Thereafter the goods are handed over to transporter with signed Form 2.1. The truck transporter after delivering the goods receives Form 3.3 from depot officer of applicant which proves that he has delivered the goods. Further, transporters do not issue any consignment note.
The AAR found that ‘consignment note’ has not been defined in the Act or in the Notification either. Therefore, they referred Explanation to Rule 4B of Service Tax Rules, 1994 wherein ‘consignment note’ has been defined as a document provided by a goods transport agency against the receipt of goods for the transport of goods by roadways in a goods carriage. The document contains the details like serial number, name of the consigner and consignee, registration number of the goods carriage in which the goods are transported, details of goods being transported, details of the place of origin and destination, and the person who will be liable for payment of freight. AAR noticed that the details required to be mentioned in the consignment note were also mentioned on the so called ‘ravana’ issued in the case. Hence, it was concluded that said ‘ravana’ should be considered as consignment note as if it is interpreted that non-issuance of consignment note by GTA does not require payment of GST, then it would open avenues for tax evasion which is definitely not intended. Therefore, it was held that the services received from the unregistered transporters by the applicant falls under the definition of “GTA’ services in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and the same are covered under ‘RCM’ in terms of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017.
The provisions of GST law are similar to erstwhile indirect taxation law and so the judicial pronouncements of erstwhile regime have reference value in GST era also. It is worth mentioning that there have been decisions rendered by various Tribunals in the erstwhile regime that non-issuance of consignment notes would not attract service tax liability. To illustrate, reference may be made to CHHATTISGARH STATE CO-OPERATIVE MKG. FEDERATION LTD. VERSUS COMMR. OF S.T., RAIPUR [2019 (22) G.S.T.L. 265 (TRI. - DEL.)] andNORTHERN COAL FIELD LTD. VERSUS COMMISSIONER OF C. EX., ALLAHABAD [2018 (10) G.S.T.L. 245 (TRI. - ALL.)] wherein it was held that consignment notes are mandatory requirement for levying service tax and non-issuance of consignment will lead to no liability to discharge service tax. However, contrary view was taken in the case of BHARATHI SOAP WORKS VERSUS COMMISSIONER OF CUS. & C. EX., GUNTUR [2008 (9) S.T.R. 80 (TRI. – BANG.)]wherein it was held that non-issuance of consignment note cannot be ground for not following statutory provisions and transporters were bound to issue consignment notes and service recipient were liable to pay service tax. Therefore, the tussle regarding importance of consignment note for levying tax will be resolved only by decision of Apex Court or clarification by the Government.

This is solely for educational purpose.

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Update on importance of consignment note in determining tax liability 114/2020-21

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