2018 (3) TMI 1281 - AT - Service Tax

GTA service - reverse charge mechanism - After collecting the amounts from their clients they pay the charges to the transporters from whom the vehicles were engaged and service tax of entire freight charges for the amounts billed by appellants is discharged by their clients under reverse charge mechanism as a recipient of GTA services - whether appellant is required to discharge the service tax liability under the category of goods transport agency or otherwise? Held that - The definition of a person liable to discharge service tax liability under goods transport agency is under reverse charge mechanism and has been ensigned under Section 65(50)(b) of the Finance Act 1994 read with the said Rules - 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. The demands raised by the lower authorities and confirmed cannot be upheld as identical issue came up before the Tribunal in the case of Essar Logistics Ltd Vs CCE 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. - Therefore, the appellant has no liability to pay the service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeals against orders-in-original regarding service tax liability under goods transport agency services.

Analysis:
The appeals were filed against orders-in-original alleging non-discharge of service tax liability under goods transport agency services. The appellant was accused of not paying service tax for providing cargo handling services to clients by engaging vehicles/trucks from transport organizations. The Revenue claimed that since the appellant paid transporters for vehicles, they were liable for service tax. The appellant argued they only paid hiring charges and later billed clients for the entire amount plus commission. The adjudicating authority rejected the appellant's defense, confirming demands and imposing penalties. The appellant's counsel argued that clients discharged service tax liability under reverse charge mechanism. The Tribunal considered both sides' submissions and reviewed the records.

The undisputed facts revealed that the appellant, a transporter, billed clients for transportation services, and clients paid freight charges, discharging service tax liability. The appellant engaged vehicles from other transporters when short of their own, charging clients for these services. After receiving payments from clients, the appellant settled transporters' bills. The issue was whether the appellant was required to pay service tax under goods transport agency services.

The definition of a person liable for service tax under goods transport agency services is under reverse charge mechanism per Section 65(50)(b) of the Finance Act 1994. Rule 2(1)(d)(v) of the Service Tax Rules 1994 specifies the person liable for paying service tax as the consignor, consignee, or a person liable to pay freight charges. The Tribunal cited precedents to support that service tax liability falls on the consignor or consignee, not the transporter. The Tribunal referenced a case where a refinery and factory were not held liable for service tax under similar circumstances.

The Tribunal found that the demands raised by lower authorities were not valid, citing previous decisions where the liability to pay service tax rested with the consignor or consignee, not the transporter. The Tribunal overturned the impugned orders, allowing the appeals. The decision was based on established precedents and the interpretation of relevant legal provisions.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned orders and allowing the appeals. The judgment emphasized that service tax liability under goods transport agency services falls on the consignor or consignee, not the transporter who engages vehicles. The decision was based on a thorough analysis of the legal provisions and precedents in similar cases.