Individual truck owner not covered under GTA.

PJ/Case Laws/2012-13/1260

Case: - BAZPUR CO-OPERATIVE SUGAR FACTORY LTD versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-II

Citation: - 2012-TIOL-1262-CESTAT-DEL

Brief Facts: - The Appellants are engaged in the manufacture of VP sugar and molasses. They collected sugarcane from farmers at various collection centres. They engaged individual farmers for transportation of sugarcane from collection centres to the factory and paid charges for such transportation. The appellant were not paying service tax on such services received by them and for this reason Revenue made out a case that the Appellant were liable to pay service tax along with interest and penalties on the amounts paid to the transporters. Thereafter, the Appellant filed appeal with the commissioner (Appeals) who waived penalties imposed under Section 78 but confirmed penalty under Section 77 and no relief was given in the matter of service tax to be paid. Aggrieved by the orders of the Commissioner (Appeals), the Appellants have filed the present appeal along with application for waiver of pre-deposit of dues arising from the impugned orders for admission of appeal.

Appellant Contention:- The Appellant submit that the truck owners who were transporting the sugarcane from the collection centres to the factory cannot be considered as "Goods Transport Agency" within the meaning of the definition given to the expression in 65(50) of Finance Act, 1994. According to him, only persons booking cargo and issuing consignment notes can be considered as goods transport agency. The Appellant submits that since the sugarcane which was collected at the collection centres was already property of the Appellant, there was no need for any consignment note for dispatching the same using the services of truck owners who were mostly individual firms. Therefore there are no merits in the case made out by Revenue and the appeal should be heard without any pre-deposit.

Respondent Contention: - The Respondent submits that any person who transports the goods is required to issue consignment note. The fact that the transporters in this case did not comply with the said service tax rules cannot be a reason to absolve the receivers of such service from tax liability and further points out that the plea regarding transportation by individual farmers is not correct because there is no proof that the trucks were owned by farmers. The argument that farmers are using their trucks for this activity and not for goods transport activity in general cannot be true because nobody can invest in trucks and keep the truck idle except during sugar season. So if at all farmers are owning the trucks it is because they are undertaking goods transport operation as another profession. Therefore, the truck owners who transported sugarcane should be treated at par with any other truck owners and the issue decided accordingly.

Reasoning of Judgement: - We have considered the arguments from both sides. We find that the definition of "Goods Transport Agency" under Section 65(50b) of Finance Act 1994 and provision of Rule 4A of Service Tax Rules are logically inconsistent. The entry in the Act defines "Goods Transport Agency" as one which issues consignment notes and thereafter Rule 4B says that "Goods Transport Agency" has to issue consignment note. So which criteria has to be satisfied first is not clear. That is to say if a goods transport operator does not issue consignment note he does not come within the meaning of "Goods Transport Service" and then the requirement under Rule 4B also is not enforceable. By the speech given by the Finance Minister for the budget of 2004, it appears that there was clear intention not to levy service tax on individual truck owners except in cases where the cargo for such trucks are booked by "Goods Transport Agency" which is in the business of booking cargo and issuing the consignment note in the normal course of their business. Therefore, at this prima facie stage, we consider it proper to waive pre-deposit of dues arising from the impugned orders for admission of appeal. We order accordingly. Further, there shall be stay on collection of such amounts during the pendency of the appeal.

Decision: - Stay granted.

Comment:- This is very good decision holding that the GTA is a service tax on goods transport agency. When agency is not involved then there is no service tax. The transaction between individual truck owner and factory owner is not liable to service tax. The issue of consignment is a mandatory condition for levy of service tax under Goods transport by road. These are issued transport agency. When the truck owner directly contacts the factory owner then no consignment note is issued, hence there is no service tax.

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PJ/Case Laws/2012-13/1260

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