2018 (9) TMI 131 - AT - Service Tax

Reverse charge mechanism - GTA Services - transportation of goods by road and making payment of inward / outward freight which was incurred by them for consignment - Held that - The department has based the case on the fact that appellant is a factory registered and is governed under the Factories Act, 1948, as is apparent from para 2 of the show cause notice. The appellant is a proprietary concern and is otherwise registered under the District Industries Centre. Thus, it becomes clear that appellant is not covered under the Factories Act. The appellant is a proprietorship concern employing less than 10 workers and has not been registered under Factories Act but registered under MP Shop and Establishment Act. Therefore, Rule 2(1)(d)(v) of the Service Tax Rules is not applicable to them and they are not liable to pay Service Tax under GTA Service as recipient of services. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of the applicability of Service Tax Rules to a proprietorship concern employing less than 10 workers.
2. Determination of liability to pay Service Tax under GTA Service as a recipient of services.
3. Consideration of relevant facts under the Factories Act and MP Shop and Establishment Act.

Analysis:
Issue 1: The main issue in this case was the interpretation of Rule 2(1)(d)(v) of the Service Tax Rules concerning the applicability of service tax to a proprietorship concern with less than 10 workers. The appellant argued that they were not covered under the Factories Act and were registered under the MP Shop and Establishment Act, thus not liable to pay service tax under GTA Service. The department had alleged the appellant was receiving services of a goods transport agency and levied a demand under Section 65(105)(zzp) of the Finance Act, 1994.

Issue 2: The Tribunal analyzed the facts presented and observed that the appellant, being a proprietary concern employing less than 10 workers and registered under the MP Shop and Establishment Act, was not covered under the Factories Act. Therefore, Rule 2(1)(d)(v) of the Service Tax Rules was deemed inapplicable to them. Consequently, the appellant was held not liable to pay service tax under GTA Service as a recipient of services. The Tribunal noted that the adjudicating authority had overlooked this crucial fact, leading to the unsustainability of the order.

Issue 3: Further, the Tribunal highlighted that the appellant's registration under the District Industries Centre and not under the Factories Act supported their argument of not being liable to pay service tax under GTA Service. By considering the relevant provisions of the Factories Act and the MP Shop and Establishment Act, the Tribunal concluded that the appellant was not subject to service tax under the GTA Service. The Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, emphasizing the importance of correctly applying the relevant legal provisions in such cases.

In conclusion, the Tribunal's decision was based on a thorough analysis of the appellant's registration status, the relevant legal provisions, and the department's allegations. By clarifying the appellant's position under the Factories Act and the Service Tax Rules, the Tribunal ruled in favor of the appellant, setting aside the order and relieving them of the liability to pay service tax under GTA Service as a recipient of services.