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PJ/CASE STUDY/2010-11/37
10 January 2011

During the period 01.11.2006 to 31.03.2007. service tax on inward freight not paid
PJ/Case Study/2010-11/37

 
 

Case Study

 
Prepared By:
CA. Pradeep Jain
CA. Rajani Thanvi
Sukhvinder Kaur LLB, [FYIC]
Megha Jain

 
 
 

Introduction:

 

It is well known fact that there can not be two times levy of any tax on one transaction. It is also clarified that liability of payment of service tax occurs only once and if the same has been deposited by a person than other person cannot be held liable for the same transaction. Whether the consignee is liable to pay service tax to the government exchequer on the freight paid to the Goods transport Agency in case where the service tax is already paid to the Goods Transport Agency and consequently the same has been deposited to the government exchequer by that Goods Transport Agency. Such an issue is involved in the case study.

 
Relevant Legal Provisions:
 

Circular F. No. 341/18/2004-TRU (PT.). Dated 17.12.2004
 
“5.7 If service tax due on transportation of a consignment has been paid or is payable by a person liable to pay service tax should not be charged for the same amount from any other person for the same amount from any other person, to avoid double taxation.”

 

  M/s Evergreen International Ltd. (Unit-II), (100% EOU) v/s Deputy Commissioner, Central Excise Division, Jodhpur

[Order-In-Appeal No.493 (CB) ST/JPR-II/2010]

 

Brief Facts:
During the period 01.11.2006 to 31.03.2007 the appellants has not paid Service tax amounting Rs. 21675/- on inward freight which was payable by them as per Rule 2(1) (d) (v) of Service Tax Rules, 1994 read with notification no. 36/2004-ST, dated: 03.12.2004. Therefore, adjudicating authority vide impugned order ordered to recover the service tax amounting to Rs. 21675/- alongwith interest under section 73 and 75 of the Finance Act, 1994.
 
Submission of the Appellants:
 
 

  • The appellant submit that in the impugned order it has been held that since the appellant is a factory/company so as per Notification No. 35/2004-ST they being consignee and paid the freight was required to pay the service tax on the same. It was further held that as the appellant during the period from 1.11.2006 to 31.03.2007 they have paid the freight of Rs. 708344/- so as per Rule 2 (1) (d) (v) of the Service Tax Rules, 1994 read with Notification No. 36/2004-ST dated 03.12.2004, the appellant had to pay the service tax. In this regard it is submitted that although the liability of payment of service tax has been fixed on the appellant but it is not a case where there was no payment of service tax to the Government Exchequer. The service tax was charged by the transporter i.e. Thar Dry Port in their invoice and the appellant have paid the service tax on GTA (Inward) to the transporter. The non – payment of service tax by the appellant being consignee of goods was only an irregularity and not an illegality for which the appellant could be held liable to pay the service tax again when the appellant has already paid the service tax to the transporter. While passing the impugned order, the learned Deputy Commissioner has not considered the fact that there was no shortfall at the account of Government exchequer. The demand can be confirmed only in respect of the amount of service tax which causes loss of revenue to the government which is not the case here. As such, the confirmation of the demand against the appellant is not justified and is liable to be set aside.

 

  • The appellant further submit that in the impugned order the plea of the appellant regarding double taxation has been wrongly rejected on the ground that there was no one to one co-relationship. In this regard the appellant submit that the service tax was paid by the transporter instead of the consignee of goods. Here what is relevant - that on a particular amount service tax is paid, whosoever pays is not much relevant as also clarified by the Board vide circular no. 97/8/2007-S.T., dated 23-8-2007. In this circular board has clarified that whosoever pays the service tax on GTA – whether it is the consignor, consignee or the GTA, credit will be allowed. This clarifies that the government is of the view that when the service tax has been paid to the exchequer, all the related benefits should be extended to the recipients of the service. If the intention of the government was to recover the service tax from the “person liable to pay the service tax” inspite of the fact that the same has been paid by the transporter, it would not have extended the benefit of Cenvat Credit in the cases where the service tax has been paid by the transporter. This circular was discussed in depth in the reply to show cause notice and during personal hearing, but the same has not been considered while passing the impugned order. The appellant has relied upon the case of Collector of Central Excise, Vadodara v/s Dhiren Chemical Industries [2002 (139) ELT 3 (SC)] in which the Hon’ble Apex Court has held that C.B.E. & C. Circulars binding on Revenue even if placing different interpretation then Supreme Court. The analysis of this decision makes it clear that while deciding any case, the Board Circulars are to be kept in mind. Since the impugned order is issued in contradiction to the above stated Circular, it should be set aside. Since the order passed by the respected Deputy Commissioner is going beyond the ratio of Board Circular and also beyond the intention of the government, it is not justified and is liable to be quashed.
  • The appellant has also relied upon the following casesrelating to double taxation:
  • IN RE : Menon Pistons Ltd. [2010(18)S.T.R. 803 (Commr. Appl.)]
  • Navyug Alloys Pvt. Ltd. Versus Commr.  Of C. Ex. & Cus., Vadodara-II[2009(13)S.T.R.421(Tri.-Ahmd.)]
  • Invincible Security Services Versus Commissioner of C.ida [2009(13)S.T.R. 185 (Tri.-Del.)]
  • The appellant submit that the appellant had produced the certificate from the transporter i.e. The Thar Dry Port before the learned Deputy Commissioner to the effect that the service tax during the disputed period was paid by the transporter. However, the learned Deputy Commissioner has not considered the said certificate and has confirmed the demand of service tax wrongly on the ground that there is no one to one relationship established. Since the service tax already stands paid to the government exchequer as confirmed and certified by the payer of service tax – M/s Thar Dry Port, demanding the same once again would result into double taxation which is not justified in the light of the clarification given by the Ministry’s Circular F. No. 341/18/2004-TRU (PT.). Dated 17-12-2004. In this Circular it was held that liability of payment of service tax occurs only once and if the same has been deposited by a person than other person cannot be held liable for the same service and such cannot be taxed twice. This Circular has also been discussed in the reply to show cause notice and during personal hearing but its ratio has not been extended to the appellant. As such, once again the order is proved as an order simplicitor which is passed in contradiction to the Board Circular which is not tenable in the light of decision of Dhiren Chemicals as discussed here above. Thus, the impugned order should be set aside and the appeal should be allowed.

 

  • The appellant further contended that they had placed reliance on the judgment given in the case of M/s Mandev Tubes Vs CCE, Vapi [2009-TIOL-1231-CESTAT-AHM]wherein it was held that where the Service tax has been paid by the transporters, it cannot be demanded by any other person. Similar decision given in the case of  M/s Lilason Breveries Ltd Vs CCE, Bhopal [2010-TIOL-15-CESTAT-DEL] was also relied upon by the appellant wherein it was held that Appellants are not liable when service tax is already paid by GTA himself.
  • However, the Deputy Commissioner has neither discussed these decisions in the impugned order not had given any findings why these decisions are not applicable to the case of appellant. As such, the order given by the esteemed Deputy Commissioner is a non-reasoned order which is not sustainable in  the light of decision given by hon’ble Apex Court in the case of State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS].In this case it is held by the Hon’ble apex court that on plainest consideration of justice, the High Court ought to have set forth its reasons, howsoever brief, in its order indicative of an application of its mind, all the more when its order is amenable to further avenue of challenge. The absence of reasons has rendered the High Court order not sustainable.

 

  • The analysis of this decision makes it clear that the order passed without giving reasons of decision is not justified in the eyes of law. Similar decision has recently been given by the hon’ble Gujarat High Court in the case of CC Vs Essar Oil Limited [2010-TIOL-560-HC-AHM-CUS]. In which it is held that CESTAT is required to pass reasoned speaking orders.

 

  • In the case of appellant also, no reasons has been assigned why the case laws cited by them are not applicable. As such, the impugned order passed without assigning the reasons is not justified and is liable to be quashed. The appeal should therefore be allowed.

 
Issue Involved:
 
During the period 01.11.2006 to 31.03.2007 the appellants has not paid service tax amounting to Rs. 21675/- on inward freight which was payable by them as per Rule 2(1)(d)(v) of Service Tax Rules, 1994 read with Notification No. 36/2004-ST dated 03.12.2004.   
 
 
Discussion and Findings:
 

  • The Commissioner (Appeals) carefully gone through the case records and submissions made in the appeal. The appellant pleaded that the service tax has been paid to the transporter and transporter deposited the service tax to Govt. exchequer, and further contended that since tax has been once paid then it cannot be demanded again.

 

  • Commissioner observed that it is not in dispute that the GTA has deposited the collected service tax to the government exchequer, therefore commissioner is of the view that if once the service tax has been paid by the GTA then it cannot be demanded again by the service receiver on the ground that the service receiver is liable to pay. Commissioner relied upon the judgment of Hon’ble Tribunal in the case of M/s Mandev Tubes [2009 (16) STR 724 (Tri. – Ahmd.)].

 
Decision:
Impugned order is set aside and appeal is allowed.
 
Conclusion:
 
One again the issue has been rightly held that once a tax has been paid than it cannot be demanded again for the same transaction. Now it is again cleared by the Commissioner (Appeals) that if once tax has been paid by the GTA than it cannot be recovered again from the consignee/consignor on the ground that the liability to pay service tax in case of GTA inward is on service recipient.  

 

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