2017 (3) TMI 564 - AT - Service Tax

Liability of tax - demand on the ground that as the payment of freight to the transporters has been made by the appellant they are liable to pay service tax on such goods transport in terms of Rule 2 (1) (d) (v) of the Service Tax Rules, 1994 - Held that - the appellants are neither the consignor nor consignee of the goods transported. Further, the appellant who is financing the purchase of fertilizer by the primary cooperative societies is also bearing the cost of transportation on behalf of the consignees (primary cooperative societies) as per the arrangement evolved by the Government. In such situation, it is clear that the appellant being neither a consignor nor the consignee cannot be put to the liability in terms of the above said rule for payment of service tax - appeal allowed - decided in favor of appellants.

Summary

Issues:
1. Liability to pay service tax on goods transport by a registered Cooperative Central Bank.
2. Applicability of Rule 2 (1) (d) (v) of the Service Tax Rules, 1994.
3. Interpretation of the role of the appellant as neither consignor nor consignee in the transportation of goods.
4. Clarification on the liability of service tax in the context of the appellant's financing of fertilizer purchase and transportation for primary cooperative societies.

Analysis:
The judgment revolves around the liability of a registered Cooperative Central Bank to pay service tax on goods transport under the Service Tax Rules, 1994. The appellant, a banking society, paid freight to transporters for fertilizer distribution to primary cooperative societies. The Revenue contended that the appellant was liable to pay service tax on such transport under Rule 2 (1) (d) (v). The Commissioner (Appeals) confirmed the service tax liability but set aside imposed penalties.

The appellant argued that they financed primary cooperative societies as per Government mandates for fertilizer distribution, making them neither consignor nor consignee of the transported goods. They contended that the freight payments were on behalf of the primary societies, acting as a banker in the transaction. The Revenue reiterated their position based on the rule's definition, emphasizing the appellant's payment of freight.

Upon review, the Tribunal found that the appellant, not being the consignor or consignee, should not bear the service tax liability. The appellant's role as a financier for fertilizer purchase and transportation to primary cooperative societies indicated that the liability rested with the actual consignees. The Tribunal highlighted that the primary societies paid the freight through the appellant, evident from the disbursement records. As the primary societies were the consignees and liable for freight payment, the appellant's involvement did not warrant service tax liability under the rule.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal on the grounds that the appellant, acting on behalf of primary cooperative societies, was not liable for service tax on goods transport. The judgment clarified the interpretation of the rule in the context of the appellant's role in financing fertilizer distribution, emphasizing the distinction between consignors, consignees, and financiers in determining service tax liability.