Whether individual truck owners considered as commercial concerns so as to attract service tax under GTA?

PJ/CASE LAW/2015-16/2585

Case:COMMISSIONER OF CENTRAL EXCISE, SALEM VERSUS K.M.B. GRANITES PVT. LTD.

Citation:2014(35) S.T.R. 63 (MAD.)

Brief Facts:This Revenue is on appeal as against the Final Order No. 89/2010, dated 15-1-2010 [2010 (19) S.T.R. 437 (Tribunal)], passed by the Customs Excise & Service Tax Appellate Tribunal (hereinafter called as “CESTAT”).
The period covered herein is from January 2005 to June 2005. In spite of service of notice on the assessee there is no representation by the assessee before this Court either in person or through a counsel. Hence, after perusing the records and on hearing the submissions of learned counsel for the Revenue, the present order is passed.
The assessee herein is engaged in the manufacture of polished granite monuments/slabs/tiles. They availed the services of Goods Transport Agency for transporting both their inward as well as outward goods and hence liable to Service Tax as per provisions of Rule 2(1)(d)(v) of Service Tax Rules, 1994. Since the assessee did not pay the tax proceedings were initiated against the assessee, calling upon the assessee to pay the Service Tax due on the service receipt from the Goods Transport Agency. The Revenue referring to Section 65(50b) of the Finance Act, 1994, issued a show cause notice calling upon the assessee, that the assessee is contravening the provision of Section 68 of the Finance Act, 1994, in not paying the Service Tax on the freight charges paid to the Goods Transport Agency and in not filing the prescribed monthly returns. As regards in C.M.A. No. 2573 of 2010, show cause notice was issued to the assessee for the period from July 2005 to September 2006. Thus, apart from demanding tax under Section 73(1) of Chapter 5 of the Finance Act, for the period from January 2005 to September 2006, the adjudicating authority proposed to initiate action under Section 75 of the Finance Act.

Appellant Contentions: The Revenue however pointed out that as per Rule 4B of the Service Tax Rules, it is mandatory for a Goods Transport Agency to issue consignment note in respect of taxable services; the recipient of the services cannot avoid payment of Service Tax taking advantage of the Goods Transport Agency’s failure to issue a consignment note. The Assessing Officer further pointed out that the assessee had not produced any documentary evidence that they had not availed the services of Goods Transport Agency. He further pointed out that the expression ‘commercial concern’ as available under the provision would include a Public Limited Company or a Co-operative society, or a firm, or any other person or body of persons engaged in trade or commerce. Thus, an individual providing service would also be included within the frame of expression ‘commercial concern’; consequently, the demand of Service Tax was liable to be confirmed.

Respondent Contentions:The assessee contended that in view of the amendment to Section 65(50b) of the Finance Act, ‘Goods Transport Agency’ means any commercial concern which provides service in relation to transport of goods by road and issues consignment note, by whatever name called. The assessee further contended that they had not engaged any GTA as defined in the Finance Act, 1994 and that they had engaged only individual operators and no consignment notes or invoices were raised by the transport operators; thus, the question of suffering Service Tax did not arise.

Reasoning of Judgment:We find from the reading of the CESTAT order that the only ground taken therein was related to Section 65(50b) of the Finance Act. The CESTAT following the Bangalore Bench decision in the case of Lakshminarayana Mining Co. v. CST, Bangalore reported in 2009 (16) S.T.R. 691 (Tri.-Bang.) as well as in the case of CCE, Guntur v. Kanaka Durga Agro Oil Products Pvt. Ltd reported in 2009 (15) S.T.R. 399, held that transport undertaken by the individual lorry owners or truck owners are not considered as “commercial concern” under Section 65(50b) of Finance Act. Consequently, the CESTAT allowed the assessee’s appeal. Aggrieved by this order, the present appeal has been filed by the Revenue.
We have already considered the correctness of the CESTAT’s order in CMA. Nos. 3079 & 3080 of 2011 [The Commissioner of Central Excise v. The Salem Co-Operative Sugar Mills Ltd. & Anr.] by order dated 4-10-2013, which followed the decision of the Bangalore Bench decision in the case of CCE, Guntur v. Kanaka Durga Agro Oil Products Pvt. Ltd. reported in 2009 (15) S.T.R. 399 wherein, it was held that Section 65(50b) of Finance Act, did not cover a case of proprietary commercial concern to be treated as ‘Goods Transport Agency’ and set aside the order of CESTAT that the expression ‘commercial concern’ would include a proprietary concern also.
In the light of the decisions thus given by us in CMA. No. 3079 & 3080 of 2011 (cited supra), we set aside the order of the Customs Excise and Service Tax Tribunal and hold that the individual operator would also be covered within the meaning of expression ‘commercial concern’ as appeared under Section 65(50b) of Finance Act. Consequently, the appeals in CMA No. 2567 of 2010 and CMA No. 2573 of 2010 are allowed and the order of the CESTAT is set aside. No Costs.

Decision:Appeal Allowed.

Comment:The crux of this case is that individual lorry owners or truck owners are considered as commercial concerns within the purview of Good Transport Agency definition. Hence, service tax on freight charges under reverse charge mechanism should be paid by service receiver even in case of GTA services availed by individual lorry operator. It is worth mentioning here that this decision is not applicable in the present scenario because GTA means one who issues consignment note and individual truck owners do not issue consignment note. When the consignment note is not issued which is the main criteria for levying service tax, then no service tax is payable. Moreover, the Finance Minister while announcing tax on GTA services made it clear that the intention of law is not to being individual truck owners within the ambit of service tax.

Prepared by: Hushen Ganodwala

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