2017 (3) TMI 940 - AT - Service Tax

Liability of tax - GTA service - sub-contract work - reverse charge mechanism - Held that - in the case of GTA service the levy of service tax has been shifted from the service provider to the person who is liable to pay freight where consignor or consignee of the goods is covered under any of the seven specified categories - From the agreement entered into between the appellant and M/s Lee & Muirhead Pvt. Ltd, we note that the latter will be entitled to the payment of ₹ 927/- per freight tonne which included ₹ 770/- for transportation and balance for other services. From this, it is evident that it is the appellant who pays freight for the transportation of the goods - the appellant being a public limited company is covered within one of the seven categories specified where the service tax liability will be on the consignor / consignee. Further, the freight is also borne by the appellant. There is no doubt that the consignee is M/s NTPC. Consequently, the liability for payment of service tax under GTA in this case falls on the appellant in terms of Rule 2(d)(v) of Service Tax Rules, 1994. Appeal dismissed - decided against appellant.

Summary

Issues: Liability for payment of service tax under Goods Transport Agency (GTA) service; Applicability of Notification No. 35/2004-ST; Interpretation of Rule 2(d)(v) of the Service Tax Rules, 1994; Time-barring of the demand.

Liability for payment of service tax under GTA service:
The case involved a contract for transportation, insurance, installation, and commissioning of goods for a power plant project. The appellant imported goods and subcontracted transportation services to M/s Lee & Muirhead Pvt. Ltd., who further engaged M/s Essemm Logistics for transportation. The Revenue contended that the appellant was liable for service tax under GTA as they paid freight to M/s Lee & Muirhead Pvt. Ltd. The appellant argued that liability should be on the consignor or consignee as per Notification No. 35/2004-ST. The Tribunal analyzed the agreement and found that the appellant paid freight for transportation, making them liable for service tax under Rule 2(d)(v) of the Service Tax Rules, 1994, as a consignor/consignee covered under specific categories. The Tribunal upheld the liability on the appellant due to the payment of freight.

Applicability of Notification No. 35/2004-ST:
The appellant relied on Notification No. 35/2004-ST to argue against the liability for service tax under GTA. However, the Tribunal found that based on the agreement and payment structure, the liability fell on the appellant as the payer of freight. The Tribunal emphasized that the consignor/consignee status and payment responsibility determined the service tax liability, supporting the Revenue's position regarding the liability under GTA service.

Interpretation of Rule 2(d)(v) of the Service Tax Rules, 1994:
The Tribunal interpreted Rule 2(d)(v) of the Service Tax Rules, 1994, which shifts the service tax liability under GTA from the service provider to the person liable to pay freight. Analyzing the payment structure and contractual obligations, the Tribunal concluded that the appellant, being a consignor/consignee and freight payer, was responsible for the service tax payment under GTA. The interpretation of the rule played a crucial role in determining the liability in this case.

Time-barring of the demand:
The appellant contended that the demand was time-barred and cited a Tribunal decision in support. However, the Tribunal distinguished the cited case, stating it was not applicable to the present facts. The Tribunal rejected the time-barring argument and upheld the impugned order, dismissing the appeal. The issue of time-barring was addressed but did not alter the decision regarding the liability for service tax under GTA.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's reasoning in determining the liability for service tax under GTA service, considering relevant notifications and rules.