Whether engaging drivers for transportation of goods on private trucks amounts to provision of GTA service?

PJ/CASE LAW/2016-17/3127

Case:-M/s SVR ELECTRICALS PVT LTD Vs COMMISSIONER. C & CE, GUNTUR

Citation:- 2016-TIOL-1281-CESTAT-HYD

Brief Facts:-The appellants are engaged in the manufacture of Electrical Distribution Transformers and are registered for the category of Goods Transport Agency Service. During the course of audit it was observed that appellants had entered into contract with M/s Nepal Electricity Authority, Nepal for supply of 628 nos. of electrical transformers. The contract value was inclusive of transportation charges of Rs.69,00,000/- which was to be borne by appellants as per agreement between appellant and M/s Nepal Electricity Authority. The appellants contested the demand of service tax stating that duty having been paid on FOR basis they are not liable to pay service tax on freight charges. On scrutiny of invoices, it was observed by department that in the invoices, the assessable value is not inclusive of freight. That appellants suppressed the value of freight by not informing the department about the freight element. A show cause notice was issued which after adjudication, confirmed the demand of service tax along with interest and also imposed equal amount of penalty under Section 78 of the Finance Act, 1994. Aggrieved by this order, the appellants preferred appeal before the Commissioner (Appeals) who vide the order impugned herein upheld the same.

Appellant’s Contention: -The learned counsel appearing for appellant has furnished detailed written submissions and consented /requested that the case be decided basing on the written submission. Therefore, the case was taken up for disposal, after perusal of appeal, written submissions and hearing the department representative. The main plea raised in the written submission is that the trucks were driven by drivers of the appellant. That being private trucks they do not fall within the definition of"Goods Transport Agency" . The appellant has relied on the judgment of CESTAT in Lakshmi Narayana Mining Co. Vs. CST, Bangalore 2009(16) STR 691(Tri)= 2010-TIOL-122-CESTAT-BANG. It is also submitted that the show cause notice is time barred. That there was no suppression of facts on the part of the appellant. The freight charges were shown in the invoices and these invoices were signed by the jurisdictional Officer and the same was also declared in the I.T. Returns. That therefore, the demand is time barred.

Respondent’s Contention:-The learned DR Shri M.S. Naskar contended that the decision in Lakshmi Narayana Mining Company case (Supra) is no longer good law. That the Hon'ble High Court of Madras in CCE, Salem Vs Suibramia Siva Co-operative Sugar Mills Ltd. 2014 (35) STR 500 (Mad) has held that the use of the word "any person" in the definition of "Goods Transport Agency" includes individual truck owners also. Similar view was taken in the case of Sree Balaji Transport Vs CCE & ST, Tirupathi 2015 (38) STR 651 (Tri-Bang). In the case of Sree Balaji Transport, the tribunal examined the issue whether transportation undertaken by individuals owning and operating lorry and truck is subject to service tax. The Tribunal observed that under Section 60(506), Goods Transport Agency means "any person who prides service in relation to transport of goods by road and issues consignment note, by whatever name called" . The language of the section is unambiguous and that 'any person (including individuals) who provides service in relation to transport by road is liable to service tax".

Reasoning Of Judgment: -The Tribunal heard the contentions and concluded that in view of judgments relied upon by the DR, on merits, the issue is against the assessee. The next ground raised is that the show cause notice dated 15-09-2009 for the period 20-05-2008 to 16-06-2008 is barred by limitation. The appellant contends that there was no suppression with intention to evade payment of service tax. It is the case of the appellant that the freight charges were shown in the invoices and that these invoices were signed by the jurisdictional officer. As per the agreement the appellant has agreed to bear the transportation charges. The appellant is registered for "Goods Transport Agency Services". In the invoices, the appellant has shown the freight charges separately. But the appellant failed to discharge the service tax liability on the freight charges collected. In such score, the invocation of extended period of limitation is legal and proper.

In view of the above, it was found that the impugned order does not call for any interference. In the result, the appeal is dismissed.

Decision:-Appeal dismissed.

Comment:-The essence of the case is that since in view of judgments wherein service tax is payable even in case of individual truck owners, the appellant suppressed the value of freight by not informing the department about the freight element. Since, the appellant failed to discharge the service tax liability on the freight charges collected when service tax was to be discharged by them, it is clear case of non-payment of service tax. Furthermore, the invocation of extended period of limitation is also legal and proper and the appeal fails on merits as well as limitation.

Prepared By:- Alakh Bhandari

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PJ/CASE LAW/2016-17/3127

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