2017 (6) TMI 327 - AT - Service Tax

Liability of tax - GTA service - reverse charge - It was argued by the respondent that freight is paid by consignee and therefore respondent are not liable to pay service tax - whether persons specified under category (a) to (g) under Rule (v) are only the consignor or consignee, which is a criteria for liability to pay service tax? - Held that - in respect of taxable services provided or agreed to be provided by goods transport agency, where the consignor or consignee falls in all the categories (a) to (g) prescribed thereunder, any person who pays or liable to pay freight would be liable to pay service tax - any person referred in Rule 2(1)(d)(v) is not qualified by category (a) to (g) of the Rules and therefore even individual or partnership firm can fell under the category of any person specified in the said rule - appeal allowed - decided in favor of Revenue.

Summary

Issues:
- Interpretation of Rule 2(1)(d)(v) of Service Tax Rules, 1994 regarding liability for payment of service tax in relation to goods transport agency services.

Analysis:
The appeal was filed by the Revenue against the dropping of demand against a company engaged in the manufacture of tobacco products. The issue revolved around the liability to pay service tax on freight charges collected by a transport firm. The transport firm was mentioning on consignment notes that service tax is payable by the consignee. The Revenue argued that the consignor or consignee specified in categories (a) to (g) under Rule 2(1)(d)(v) are liable to pay service tax. However, the respondent contended that the liability does not extend to the consignor or consignee but to any person who pays or is liable to pay freight. The Commissioner(Appeals) had allowed the appeal of the respondent by holding that the order confirming the demand for service tax was not maintainable.

The key contention was the interpretation of Rule 2(1)(d)(v) of Service Tax Rules, 1994. The rule specifies categories (a) to (g) in relation to consignors or consignees of goods, but the liability to pay service tax is on any person who pays or is liable to pay freight. The Tribunal analyzed that the categories (a) to (g) do not determine the person liable to pay tax; instead, they identify the consignor or consignee in whose case the liability arises. The rule does not restrict the definition of "any person" to only those categories, allowing individuals or partnership firms to fall under this definition. Therefore, the Tribunal held that the Revenue had established a case, allowing the appeal and setting aside the impugned order. The case was disposed of accordingly.