2012 (8) TMI 752 - AT - Service Tax

Demand of service tax - manufacture of VP sugar and molasses - They engaged individual farmers for transportation of sugarcane from collection centres to the factory and paid charges for such transportation. The Appellants were not paying any service tax on such services received by them for transportation of goods Held that - Entry in the Act defines Goods Transport Agency as one which issues consignment notes and thereafter Rule 4B says that Goods Transport Agency has to issue consignment note - That is to say if a goods transport operator does not issue consignment note he does not come within the meaning of Goods Transport Service and then the requirement under Rule 4B also is not enforceable pre-deposit waived

Summary

Issues:

1. Whether the Appellants are liable to pay service tax on transportation services for sugarcane collection?
2. Whether the truck owners transporting sugarcane can be considered a "Goods Transport Agency"?
3. Whether the Appellants should be exempt from service tax due to the nature of transportation services received?
4. Clarification on the definition of "Goods Transport Agency" under Section 65(50b) of Finance Act, 1994 and Rule 4B of Service Tax Rules.
5. Consideration of pronouncements in the budget speech regarding the levy of service tax on individual truck owners.

Issue 1:
The Appellants, engaged in the manufacture of VP sugar and molasses, collected sugarcane from farmers and engaged individual farmers for transportation to the factory. The Revenue contended that the Appellants were liable to pay service tax on the transportation services. Show Cause Notices were issued for the periods in question, demanding service tax, interest, and penalties. The Commissioner (Appeals) waived certain penalties but confirmed others, leading the Appellants to file the present appeal seeking relief from the service tax liability.

Issue 2:
The Counsel for the Appellant argued that the truck owners transporting sugarcane should not be considered a "Goods Transport Agency" as defined in Section 65(50b) of the Finance Act, 1994. He emphasized that only persons issuing consignment notes can be classified as a goods transport agency, and since the sugarcane was already the property of the Appellant, there was no need for a consignment note for transportation.

Issue 3:
In response, the opposing party contended that any person transporting goods must issue a consignment note as per the Service Tax Rules. They argued that the failure of the transporters to comply with these rules should not exempt the receivers from tax liability. Additionally, they disputed the claim that the truck owners were individual farmers, stating that there was no evidence to support this assertion.

Issue 4:
The Tribunal noted a logical inconsistency between the definition of "Goods Transport Agency" under Section 65(50b) of the Finance Act, 1994, and Rule 4B of the Service Tax Rules. The Tribunal observed that the Act defines a goods transport agency as one issuing consignment notes, while Rule 4B mandates the issuance of consignment notes by a goods transport agency. This inconsistency raised questions about which criteria must be satisfied first.

Issue 5:
Considering the Finance Minister's statements in the budget speech regarding the levy of service tax on individual truck owners, the Tribunal found a clear intention not to impose service tax on such owners unless the cargo was booked by a "Goods Transport Agency." Therefore, the Tribunal decided to waive the pre-deposit of dues arising from the impugned orders for the admission of the appeal and ordered a stay on the collection of such amounts during the appeal's pendency.