2019 (10) TMI 1416 - AT - Service Tax

Levy of service tax - GTA service - transport subsidy - reverse charge mechanism - service provider service recipient relationship between the farmer and the appellant factory - intent to evade payment of duty or not - extended period of limitation - HELD THAT - The facts are not in dispute that the appellant procures sugarcane from the farmers and pays an amount per tonne of sugarcane. The sugarcane is delivered by the farmers to the factory in their own transport vehicles such as bullock carts tractors etc. The sale takes place at the factory. If the farmer is located far from the factory (beyond 10 K.M or beyond 20 K.M) evidently he will have to incur some cost towards transporting his own sugarcane to the factory. In addition to paying for the sugarcane the appellant is also subsidising the cost of such transportation at some fixed rates - in the first place that the farmer is not rendering any service to the appellant because he is transporting his own goods. Until the goods are delivered to the factory the services if any rendered by the farmer is only a self service. Therefore there are no service provider service recipient relationship between the farmer and the appellant factory. The goods are not necessarily carried in a motor vehicle which falls within the definition of goods carriage and no service is rendered by the farmer to the appellant and hence there is no service provider service recipient relationship. Also it is found that the issue of consignment note which is an essential ingredient for goods transport agency services to be called so is also missing in the present case - no service tax can be levied upon the appellant on the amount of transport subsidy which they paid to the farmers who bring their sugarcane for delivery to the factory. Since no service tax is chargeable the entire demand in the impugned order along with interest and consequential penalties need to be set aside. On an identical issue in the case of M/S. NANDGANJ SIHORI SUGAR CO. VERSUS CCE. LUCKNOW 2014 (5) TMI 138 - CESTAT NEW DELHI it has been held that no service tax is payable under reverse charge mechanism under the Goods Transport Agency services for the amounts paid for transportation of sugarcane by the farmers to the factory. Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Liability to pay service tax on "transport subsidy" under the "Goods Transport Agency Service" via reverse charge mechanism.
2. Whether the transport of sugarcane by farmers qualifies as "Goods Transport Agency Service".
3. Applicability of exemptions under relevant notifications.
4. Validity of extended period of limitation and imposition of penalties.

Detailed Analysis:

1. Liability to Pay Service Tax on "Transport Subsidy":
The primary issue is whether the appellant, a Cooperative Sugar Mill, is liable to pay service tax on the "transport subsidy" provided to farmers under the "Goods Transport Agency Service" via reverse charge mechanism. The Revenue contends that the transport subsidy paid by the appellant is for the service rendered by the farmers, thus chargeable to service tax under Section 66A, read with Section 65(105)(zzp) of the Finance Act, 1994.

2. Qualification as "Goods Transport Agency Service":
The appellant argued that farmers transport their sugarcane using their own vehicles, such as tractors and bullock carts, and this does not constitute a "Goods Transport Agency Service". The sale occurs upon delivery at the factory, meaning the farmers are transporting their own goods, not providing a service to the appellant. The tribunal found that the transportation by farmers is self-service, and no service provider-service recipient relationship exists between the farmers and the appellant.

The tribunal examined the definitions under the Finance Act and Motor Vehicles Act, concluding that the transportation by farmers in their own vehicles does not meet the criteria of "Goods Transport Agency Service" since no consignment notes are issued, and the farmers are not acting as commercial transport agencies.

3. Applicability of Exemptions:
The appellant argued that even if the activities were considered under "Goods Transport Agency Service", they would be exempt under Notification No. 34/2004 and Notification No. 25/2012. The tribunal noted that the essential requirement for a service to be classified under "Goods Transport Agency" includes the issuance of a consignment note, which was absent in this case. Therefore, the exemptions were not directly addressed as the service itself was not taxable.

4. Extended Period of Limitation and Penalties:
The appellant contended that they had always provided necessary information to the department, and there was no intention to evade tax, making the invocation of the extended period of limitation and imposition of penalties unsustainable. The tribunal did not specifically address this issue in detail, as the primary finding was that no service tax was chargeable in the first place.

Conclusion:
The tribunal concluded that no service tax could be levied on the transport subsidy paid to farmers, as the transportation does not qualify as a "Goods Transport Agency Service". The essential elements, such as the issuance of a consignment note and the existence of a service provider-service recipient relationship, were missing. The entire demand, along with interest and penalties, was set aside. The decision referenced similar judgments, such as in the case of Nandganj Sihori Sugar Co. Ltd., reinforcing the conclusion that no service tax liability arises under the given circumstances.

Judgment:
The appeal was allowed, and the impugned order was set aside with consequential relief, if any. The operative portion of the order was pronounced in open court upon the conclusion of the hearing.

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