2008 (5) TMI 82 - AT - Service Tax

Transportation and freight charges are added in the assessable value of the goods when clearing the same to Depot and from there to customers whether transportation charges are liable for service tax under the category of Transport of Goods by Road - In terms of the Notification35/2004, they are required to pay only 25 per cent of value of the freight - tax levied on full value is not correct - stay application is allowed by granting waiver of pre-deposit

Summary

Issues:
1. Interpretation of service tax liability on transportation charges added to assessable value of goods.
2. Applicability of Notification No.35/2004-ST on transportation charges.
3. Eligibility for credit on service tax amount.
4. Discrepancy in the amount of service tax payable.

Analysis:
1. The appellants, manufacturers of Paper and Paper Boards, were required to pre-deposit a Service Tax amount of Rs. 40,50,391 on transportation charges added to the assessable value of goods cleared to depot and customers. The revenue contended that transportation charges are liable for service tax under "Transport of Goods by Road" category. The appellants argued that since they paid central excise duty on transportation from factory to depot, service tax cannot be demanded. The tribunal noted that authorities did not address this crucial issue raised by the appellants.

2. The Notification required payment of only 25% of the value of freight for service tax, which was not considered in the tax calculation. The tribunal found that the full value of transportation charges being taxed was incorrect. The tribunal acknowledged the appellants' strong case, granting a waiver of pre-deposit and staying recovery until the appeal's disposal. The tribunal emphasized the need for a comprehensive review of the service tax liability on transportation charges in light of the Notification's provisions.

3. The appellants also raised concerns about their eligibility for credit on the service tax amount. However, the tribunal's decision did not explicitly address this issue in the summary provided. It is crucial for the tribunal to consider the appellants' eligibility for credit and provide a clear ruling on this matter during the appeal hearing.

4. The discrepancy in the service tax amount payable, with the appellants arguing for a lower tax liability of Rs. 10 lakhs instead of Rs. 40 lakhs, underscores the need for a detailed examination of the tax calculation methodology and the specific provisions of the Notification. The tribunal must ensure a fair and accurate determination of the correct service tax liability based on the relevant legal framework and factual circumstances presented in the case.