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PJ-Case law-2013/14-1577

GTA Service tax liability to be discharged by consignor or consignee who pays the freight.

Case:-AMRITA MOULDINGS PVT. LTD. VERSUS COMMISSIONER OF C.EX., GHAZABAD

Citation:-  2013(30)S.T.R. 420 (Tri.-Del.)

Brief Facts:-The appellant are manufacturer of plastic item, the raw material for which is LDPE and LLDPE granules, which they purchased from M/s. Reliance Industries. The department issued a show cause notice to the appellant for demand of Service Tax of GTA service alleged to have been received by the appellant on the ground that in respect of the consignment of LDPE and LLDPE granules received by them from M/s. Reliance Industries, the appellant have availed the GTA service of certain value in respect of which they were liable to pay Service Tax of Rs. 52,936/-. The jurisdictional Assistant Commissioner vide order-in-original dated 8-2-2010 confirmed the above-mentioned demand of service tax under Section  73 of Finance Act, 1994 along with interest and besides this, imposed penalty on the appellant. On appeal to Commissioner (Appeals), this order of the original adjudicating authority was upheld vide order-in-appeal dated 21-8-2012 against which this appeal has been filed along with stay application.

Appellant’s Contention:- The appellant is submits that in this case the appellant while receiving LDPE and LLDPE granules from M/s. Reliance Industries had not arranged the transport; that the transportation of goods had been arranged by the consignor M/s. Reliance Industries who has paid to the transporter; that in terms of Notification No. 35/2004-S.T., dated 3-12-2004 issued under Section 94(2) of the Finance Act, 1994, in case of GTA service where the consignor or consignee of the goods falls in the categories as has specified in this notification, the person who paid the freight either himself or through his agent, would be the person liable to pay service tax in terms of the provisions of Rule 2(1)(d)(v) of the Service Tax Rules, 1994, that in this case it is the consignor of the goods M/s. Reliance Industries who had engaged the transporters and had paid freight and therefore the Service tax liability would be of the consignor M/s. Reliance Industries who had availed GTA service. He, therefore, pleaded that the impugned order confirming the service tax demand on the appellant along with interest is not correct and therefore the appellant have prima facie case for waiver of dues for hearing of appeal. He accordingly pleaded that the requirement of pre-deposit of Service tax demand, interest thereon and penalty may be waived for hearing of the appeal and recovery thereof be stayed till the disposal of the appeal.

Respondent’s Contentions:-  The respondent opposed the stay application reiterating the finding of the Commissioner (Appeals) and pleaded that since the appellant have paid the expenses incurred for freight, as can be seen from the invoices, in terms of the provisions of Notification No. 35/2004-S.T., dated 3-12-2004 they would be liable to pay service tax and that the service tax demand has been correctly confirmed against them.

Reasoning of Judgment:-We have considered the submissions from both the sides and perused the record, we find that Rule 2(1)(d) of the Service Tax Rules, 1994 defines the “ person liable to pay Service Tax” in respect of certain services and clause (v) defines the “person liable to pay Service tax in respect of services of goods transport” agency. Clause (v) of Rule 2(1)(d) is reproduced below:
(d) “Person liable for paying service tax” means,
                                                            X          X          X          X          X
(v) in relation of  taxable service provided by a goods transport agency, where the consignor or consignee of goods is,-

(a) any factory registered under or governed by Factories Act, 1948(63 of 1948);

(b) any company [formed or registered under] the Companies Act, 1956 (1 of 1956)

(c) any corporation established by or under any law;

(d) any society registered under the Societies Regulation Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;

(e) any society registered under the Society by or under any law;

(f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944(1 of 1944) or the rules made there under; or

(g) any body corporate established, or a partnership firm registered, by or under any law,

Any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage;]

The wordings of the Notification No.35/2004-S.T.,dated 3-12-2004 issued under Section 94(2) of Finance Act, 1994 and of Rule of 2(1)(d)(v) of the Service Tax Rules are identical.

On perusal of Rule 2(1)(d)(v) of the Service Tax Rules and the Notification No. 35/2004-S.T, it is seen that in respect of GTA service when the consignor or consignee fall in the categories mentioned in the sub-rule and the notification, the person liable to pay service tax is one who is liable to pay freighteither himself or through his agent. In this case there is no dispute that both the consignor as well as consignee are body corporate and, therefore, the person liable to pay Service tax on the GTA service received would be the one  who person liable to pay the freight either himself or through his agent. In this case, prima facie it is the consignor, M/s. Reliance Industries Ltd. who are liable to pay the freight as it is they who have engaged the transporter. There is no evidence to show that the appellant had engaged the transporter or M/s. Reliance Industries Ltd. had acted as his agents for payment of freight. Hence in accordance with the provision of Rule 2(1)(d)(v), it is the consignor who would be liable to pay service tax and the same cannot be demanded from the appellant. In the view of this requirement of pre-deposit of Service Tax demand, interest thereon and penalty is thereon waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal.

Decision:-Stay application is allowed.

Comment:-The crux of this case is that it is important to determine the person liable for payment of freight for imposing any service tax liability under the GTA service. In addition to this, it is also to be seen whether the consignor or the consignee falls in the specified categories or not. 
 

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