Person Liable to pay Service Tax on GTA service

PJ/CASE STUDY/2011-12/24

14 September 2011

PJ/Case Study/2011-12/24

CASE STUDY

Prepared By:
CA Pradeep Jain
Sukhvinder Kaur LLB [FYIC]
And Megha Jain, B. Com

Introduction:-

In this case, the appellant is providing both Goods Transport Agency (GTA) service as well as is also providing its trucks to other GTA service providers on hire. Whether in such a situation, the assessee asked to pay service tax in both the scenarios? In first scenario where GTA service is provided to the person falling under Seven categories specified in Rule 2 (1) (d) (v) of Service Tax Rules, 1994 then the service tax liability will be on the service provider or service recipient and not transport agency. In second scenario, the assessee is only providing its trucks to other Good transport agency. In such cases, the consignor or consignee or transport agency is liable to pay service tax but the service tax cannot asked from them. These issues are involved in the appeal wherein the stay application has been filed in the case under study.

M/s Hasti Petrochemicals & Shipping Ltd v/s Additional Commissioner, C. Ex. Division, Jodhpur
[Stay Order no. 45 (CB)ST/JPR-II/2011, Dated: 11.07.2011]

Brief Facts:-

- Appellant are engaged in providing services of Goods Transport Agency. They were also giving their trucks to other Good Transport Agencies to transport goods of third parties. The consideration received by them was entered under the head Cargo Freight by the appellant in their record.

- During Audit, Department alleged that appellant were liable to pay service tax but they did not pay service tax and also did not issue consignment notes during the year 2006-07, 2007-08 & 2008-09.

- Accordingly, show cause notice was issued to the appellant demanding service tax with interest and proposing to impose penalties.

- The Adjudicating Authority confirmed the demand with interest and imposed penalties under Section 78 and 77 of the Finance Act, 1994.

- Against the Adjudication order, appellant have filed this appeal alongwith stay application. The stay order is being discussed in this case study.

Appellant’s Contentions:-

Appellant made following submissions before the Commissioner (Appeal) for grant of Stay:

1.                  Appellant submitted that they are engaged in providing services under the Transport of Goods by Road Service. It has been alleged against us that for the period from Aug, 06 to Mar, 08 appellant had not paid service tax on cargo freight collected by them where consignments notes were not issued. It is submitted that the impugned order-in-appeal is not sustainable and is liable to be set aside. The Appellant submit that in the entire demand, there are two types of transactions. In first case, they are acting as GTA and our contention is that the liability to pay service tax is on consignor or consignee. In second type of transactions, they are truck owner and giving the truck to other transport agency on hire. The consignment notes have been issued by other transport company. Then in that case, the liability to pay the service tax is not on them.

2.                  Earlier they were paying the service tax on transportation of goods as “Goods transport agency”. They were also issuing the consignment notes. But the department himself wrote to the appellant that the liability to pay service tax is on consignor or consignee if he falls under seven categories. Hence, under which authority of law, the appellant is paying the tax. Even the show cause notice was issued to client of appellant. Thus, the appellant started not paying the service tax. Then the demand is being issued to the appellant that why they are not paying the service tax on transportation of goods. The liability to pay service tax is on consignor and consignee and hence clients are liable to pay the service tax. But the department is raising demand on them.

3.                  In second type of transaction, it is submitted that they have not provided the service of Goods Transport Agency service to assessees directly but they have given their trucks for transportation to other GTA service providers. In turn the said GTA service providers have transported goods on behalf of their clients and consignors. In such a situation, the liability to pay the service tax will be either on the GTA service provider, consignor or consignee. And no liability can be fastened on them. They are only the truck owner giving/lending their trucks to the GTA service providers and receiving consideration for the same. Therefore, they are not liable to pay service tax on freight amount. They are enclosed the examples in appeal memorandum. Further, they are showing one box file of transaction for the ready reference. Even they will bring all the transaction at the time of personal hearing. If the same is required, they can submit proof of all transactions where the bility is issued by other transport agency and they have raised bill to that agency only. Further, when the truck is given on hire to other transport agency then it is exempt by virtue of exemption notification number 1/2009-ST dated 5.1.2009. This notification was given retrospective effect in Finance Bill, 2009. Hence the providing of truck to GTA is exempt from 1.1.2005 and no service tax is payable on the same.

4.                  Secondly, they submit that the learned Adjudicating Authority has not considered the copy of invoice & bilties submitted at the time of filing thier reply to the show cause notice as well as at the time of hearing. In the impugned order, it has been observed that they have not submitted any evidence and a non-speaking order has been passed confirming the duty of Rs. 2779403/- with interest and imposing equal penalty of Rs. 2779403/-. Therefore, there is violation of natural justice as evidence adduced by them was not considered. This vitiates the impugned order and makes it untenable in law. Therefore, the impugned order is not sustainable.

5.                  The appellant relied upon the following case in support of their contention that a non-speaking order was passed and the averments made by the appellant were not considered:

a.                              Uma Nath Pande v/s State of UP
b.                              Commissioner of Central Excise, Bangalore versus Srikumar Agencies [2008 (232) E.L.T. 577 (S.C.)]
c.                               M/s Southern Plywoods v/s CCE, Cochin [2009-TIOL-1320-CESTAT-BANG]
d.                              M/s Sri Chaitanya Educational Committee v/s CCE, CE &ST, Hyderabad [2011-TIOL-661-CESTAT-BANG]

6.                  They submit that they have a strong case made out in their favour and therefore, stay should be granted and the requirement of pre-deposit should be fully waived. It is submitted that the huge demand of Rs. 27, 79, 403/- alongwith interest has been confirmed against them. And equal penalty of Rs. 27, 79, 403/- under Section 78 and penalty of Rs. 5000/- under Section 77 of the Finance Act, 1994 has been imposed. And if such a huge amount is ordered in pre-deposit against them then it will cause undue hardship to them. Therefore, it is requested to grant full waiver of pre-deposit and unconditional stay should be granted to them.

7.                  In the end it was prayed that the appellant have a strong case in their favour and stay should be granted to them and the requirement of pre-deposit was waived.

Reasoning of the Commissioner (Appeal):-

- The Commissioner found that the appellant submitted that they were working as GTA at the time of sending goods to see ports and at the time of coming back they were working as truck owner, and further contended that at the time of going in terms of Rule 2(1)(d)(v) of Service Tax Rules, 1991 and Notification No. 35/2004-ST, dated: 03.12.2004 consignor of the goods was liable to pay service tax, and at the time of coming they were only truck owner and not liable for payment of service tax.

- The Commissioner also found that it was not alleged that at the time of going, any consignor was not falling under the seven categories as prescribed under notification no. 35/2004-ST, dated 03.12.2004, thus prima facie, the Commissioner found force in appellant’s contention, hence the issue appears to be in favour of the appellant.

Decision of the Commissioner (Appeal):-

Stay granted.

Conclusion:-

The learned Commissioner (Appeal) rightly granted stay in the matter as the assessee had a strong prima facie case that the consignor would be liable to pay the service tax and not the service provider.

The department always works in their own way when they have paid the service tax then the demand was issued to their client. But when they stopped paying service tax then demand was given to them. This is the reason that trade associations are always demanding accountability on the part of field formation. The department does not see how much harassment is caused to the assessee. They always bent upon issuing demands.

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PJ/CASE STUDY/2011-12/24
14 September 2011

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