2019 (3) TMI 1052 - AT - Service Tax

Liability of service tax - freight paid by appellant to a Goods Transport Agency - the said tax stands paid by the said transporter - Held that - At this stage the invoices and the challans paid by the GTA agencies are perused. Perusal thereof shows that the invoices include the amount of Service Tax and the respective liability thereof stands paid by the transporter. These documents show that appellant has availed services from three transport companies M/s. Balaji Goods Carrier, D.S. Road Lines and Kailash Translines Pvt. Ltd. Respective invoices and challans corroborating the value of those invoices being inclusive of service tax paid by the appellant alongwith the freight are on record. In addition, there have been the certificates of three of these transporters acknowledging the liability qua the GTA services to have been discharged by them - the findings of adjudicating authority that the documents are insufficient to prove that the invoices were inclusive of service tax and liability thereof stands discharged though by the service provider are apparently false. Whether the payment made against the statutory provision of rule 2 (1) (d) of service tax Rules is still acceptable? - Held that - The issue is no more res integra as has earlier been dealt with in the case of M/s. K.V. Enterprises vs. Commissioner of Central Excise, Allahabad 2018 (2) TMI 719 - CESTAT, ALLAHABAD wherein it has been held that once there has been no dispute regarding the payment of service tax though by the provider of GTA service the amount of service tax stands accepted by Revenue. The same cannot be demanded from the recipient of the said GTA service - demand set aside. Extended period of limitation - penalty - Held that - The allegation as that of suppression and misrepresentation of the facts cannot be levelled against the appellant. Resultantly, the extended period of limitation could not be invoked by the Department, nor there arises any reason for imposition of penalty. Consequently, the order confirming demand of penalty amount is liable to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of the appellant to pay Service Tax on freight paid to a Goods Transport Agency.
2. Acceptability of payment made against Rule 2 (1) (d) of Service Tax Rules.

Issue 1: Liability of the appellant to pay Service Tax on freight paid to a Goods Transport Agency

The appellant was alleged to have failed to pay Service Tax on taxable services, specifically 'Goods Transport Service,' provided to them from April 2012 to February 2013. The Department claimed that under Rule 2 (1) (b) (v) of Service Tax Rules, the recipient of such services is liable to pay Service Tax under reverse charge mechanism if the freight is paid by them. The initial demand was confirmed, and subsequent appeals were rejected. The appellant argued that they were not liable for the tax as the transporter had already paid it, supported by documents and certificates from the transporters. The appellate authorities failed to acknowledge this settled principle of law that double taxation should be avoided when the tax is already paid by the service provider. The issue was whether the appellant was liable to pay Service Tax when the transporter had already discharged the liability.

Issue 2: Acceptability of payment made against Rule 2 (1) (d) of Service Tax Rules

The question arose whether the payment made by the appellant against the statutory provision of Rule 2 (1) (d) of Service Tax Rules was still acceptable. Previous cases like M/s. K.V. Enterprises vs. Commissioner of Central Excise, Allahabad and others had established that if the service tax was already paid by the service provider, it cannot be demanded again from the recipient. The appellant's case was supported by the legal principle that once the tax is paid, the recipient is not liable for it, as upheld in various judgments. The Department's reliance on a different case was deemed inapplicable to the present circumstances, as the situation did not involve any infraction of law but merely procedural lapses. The proven discharge of liability by the service provider was considered a valid reason for the appellant to believe they were not liable to pay the tax, and penalties were set aside. The order confirming the penalty was overturned, and the demand for the period in question was deemed time-barred.

This judgment by the Appellate Tribunal CESTAT New Delhi, delivered by Member (Judicial) Mrs. Rachna Gupta, clarified the appellant's liability regarding Service Tax on freight paid to a Goods Transport Agency. The decision emphasized the importance of avoiding double taxation and upheld the principle that once the tax is paid by the service provider, the recipient is not obligated to pay it again. The appellant's case was supported by legal precedents, and the Department's arguments were deemed inapplicable to the current situation. Ultimately, the order confirming the demand and penalties was set aside, and the appeal was allowed.