Who is liable for payment of service tax on Goods Transport Agency service where the payment made to transporter by supplier on behalf of the consignee?

PJ/Case Laws/2010-11/1111

Prepared By:
CA. Rajani Thanvi &
Arpita Birla

Case: - SUDARSHAN SUIZ PVT. LTD. V/s COMMISSIONER OF C. EX., JAIPUR-II

Citation: - 2011 (21) S.T.R. 76 (Tri.- Del.)

Issue:-

Who is liable for payment of service tax on Goods Transport Agency service where the payment made to transporter by supplier on behalf of the consignee?

Brief Facts:-

Sudarshan Suiz Pvt ltd. is a Goods Transport Agency service, used to receive Yarn from mills located in Nepal. The transporter located at Bihar had transported the raw materials from Nepal border to factory of appellant in Rajasthan. Appellant contesting Service tax liability on the ground that transporter engaged by material supplier in Nepal. The Payment to transporter made by supplier on behalf of appellant but the same was reimbursed by appellant.

Appellant’s Contention:-

The Appellant argued that this is a matter to be dealt with by the Hon’ble Single Member Bench and it should be ordered to be transferred to the said Bench. He also stated that there are a larger number of similar cases where stay has been given by the Hon’ble Single Member Bench and in a few cases, the final orders have also been passed.
According to the given facts of the case, the appellant has received the raw material namely yarn for manufacture of grey fabrics from various mills located in Nepal. The goods transport service involved in these appeals relate to transport of raw material from the Nepal Border to the factory of the appellants in Rajasthan. The transporter is located in Bihar. The appellants are claiming that since the transporter has been engaged by the raw material supplier in Nepal, no service tax is payable by the appellants.

Reasoning of Judgment:-

This is a matter where the liability of the appellants to pay service tax is in question and the department has demanded service tax from them treating them to be recipient of the goods transport service. Any issue relating to demand of service tax involves determination of the rate of tax applicable and hence it is settled law that such cases cannot be heard by Hon’ble Single Member Bench. In such cases, appeals will also not lie to the jurisdiction Hon’ble High Court but to the Hon’ble Supreme Court.

The Delhi High Court in the case of Commissioner of Service Taxv. Delhi Gymkhana Club Ltd. reported in 2009 (16)S.T.R. 129 (Delhi) in its order dated 28-8-2009 has held that issue involving service tax liability and rate of service tax for demand purpose involved in a case cannot be appealed to the Hon’ble High Court but directly to the Hon’ble Supreme Court. Recently in the case of Agauta Sugar & Chemicals and Othersv. CCE, Noida and Others vide Misc. Order No. 219/2010 dated 1-9-2010 [2010 (19)S.T.R. 849 (Tri.-LB)] the Larger Bench of the Tribunal has directed the Registry to send the appeals to the appropriate Division Bench for final decision, as the issue involved in the appellants’ case related to demand of tax and hence determination of the rate of tax applicable even though the reference was made from a Single Member Bench. As such, there is no doubt that the present case and similar such cases require to be heard and decided by the concerned Division Benches.

The learned tribunal find that even though the payment to the transporter is made by the supplier initially, the same has been made on behalf of the appellants who are reimbursing the freight charges. In view of the same, the prima facie opinion was that the appellants are liable to pay the service tax as recipient of goods transport service and the decision cited by the learned Counsel taken by the learned Single Member Bench without having jurisdiction in the matter do not advance the case of the appellants for waiver of pre-deposit. It is also find that the amount of tax determined in this case is a small amount.

Decision:

Pre-deposit partly waived.

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PJ/Case Laws/2010-11/1111

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