2017 (11) TMI 291 - AT - Service Tax

GTA services - cargo handling services - It is alleged in the SCN that the appellant herein had engaged vehicles/trucks from various transport organisations and were sent to their customers for transportation of goods - whether appellant is required to discharge the service tax liability under the category of goods transport agency or otherwise? - reverse charge mechanism - Held that - service tax liability on goods transport agency services is under reverse charge mechanism more so if the consignor or consignee falls in one of the category as indicated hereinabove or a person who is liable to pay freight charges. It is on record that appellant herein does not discharge the freight charges but claims the amount from their client who pays it to the transporters from whom they engaged the vehicles - identical issue decided in the case of ESSAR LOGISTICS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, SURAT 2014 (6) TMI 763 - CESTAT AHMEDABAD , where it was held that it is very clear that the legislative intent is to tax only the services provided by a Goods Transport Agent to a customer and not the owner. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Discharge of service tax liability under goods transport agency services for providing cargo handling services.
- Interpretation of Rule 2(1)(d) of the Service Tax Rules 1994.
- Liability of the person who pays freight for transportation of goods under reverse charge mechanism.

Analysis:

Issue 1: Discharge of service tax liability under goods transport agency services for providing cargo handling services:
The appellant was alleged to have not discharged the service tax liability under the category of goods transport agency services for providing cargo handling services to their clients. The Revenue claimed that since the appellant paid transporters for vehicles and charged clients the entire amount plus commission, they were liable for service tax. The appellant argued that they only paid hiring charges and their clients discharged the service tax liability under reverse charge mechanism. The Tribunal examined the factual matrix and concluded that the appellant's clients were discharging the service tax liability, not the appellant. Therefore, the demands raised by the lower authorities were not upheld.

Issue 2: Interpretation of Rule 2(1)(d) of the Service Tax Rules 1994:
The Tribunal analyzed Rule 2(1)(d)(v) of the Service Tax Rules 1994, which defines the "person liable for paying the service tax" for goods transport agency services under reverse charge mechanism. The rule specifies that the consignor or consignee, or a person liable to pay freight charges, is responsible for service tax payment. The Tribunal found that the appellant did not pay freight charges but collected them from clients who then paid the transporters. Citing precedents such as Essar Logistics Ltd. and MSPL Ltd., the Tribunal held that the appellant was not liable for service tax under the goods transport agency category.

Issue 3: Liability of the person who pays freight for transportation of goods under reverse charge mechanism:
The Tribunal referred to previous decisions where it was established that the liability to pay service tax is on the person who actually pays the freight for transportation of goods. Relying on the precedents of Essar Logistics Ltd. and MSPL Ltd., the Tribunal held that the appellant, acting as a transporter who collected charges from clients, was not liable to pay service tax under the reverse charge mechanism. The Tribunal rejected the view expressed in the case of Darbar Transport Co and followed the conventions of Division Bench rulings over Single Member Bench decisions.

In conclusion, the Tribunal set aside the impugned orders and allowed the appeals, holding that the appellant was not liable to discharge the service tax liability under the goods transport agency services.