2023 (9) TMI 648 - AT - Service Tax

Levy of Service tax - Goods Transport Agency Service - tax on 2% amount, which it had collected towards transportation from M/s NTPC - HELD THAT - It is evident from the records that the appellant s contracts were for supply of the goods, and for provision for Erection, Commissioning and Installation and Management Maintenance and Repair Services. In order to erect and install the equipment, they need to be transported to the site by the appellant. As per the agreement, the appellant could charge 2% of the sale value of the equipment for this transportation. It did not matter what was the actual cost of transportation incurred by the appellant. If it was more, the appellant would have to suffer the loss and if it was less, the appellant could gain. Nothing in the records produced show that the appellant was providing Goods Transport Agency Service to M/s NTPC. The person liable to pay service tax in case of Goods Transport Agency Service is the one who is liable to pay the freight for the transportation of such goods. In other words, it is the NTPC which would have been liable to pay service tax and not the appellant. It also needs to be pointed out that the appellant had hired the services of Goods Transport Agencies for transporting the goods and as the service recipient, it had discharged service tax on the amounts which it paid towards goods transportation. Given the nature of contract, there is nothing to establish that the appellant was providing Goods Transport Agency Service to the NTPC. It was only charging 2% towards the cost of transportation of goods. Even if the appellant had provided the Goods Transport Agency Service, it is the NTPC which would have been liable to pay service tax on such services and not the appellant. The impugned order is not sustainable and is liable to be set aside - Appeal allowed.

Summary

Issues involved:
The appeal challenges an order confirming service tax demand on Goods Transport Agency Service for the period 2007-2008 to 2011-2012, along with penalties imposed on the appellant.

Details of the judgment:

Issue 1: Nature of Services Provided
The appellant, a subsidiary of a Russian company, engaged in services related to power generation plants and was registered with the service tax department for providing various services. The appellant entered into contracts with NTPC for setting up power projects, which included transportation of equipment to the site. The appellant invoiced NTPC for transportation charges at 2% of the goods' value, regardless of the actual transport cost incurred.

Issue 2: Liability for Service Tax
The appellant hired other transporters for goods transportation and paid service tax as a recipient of the service. However, show cause notices were issued demanding service tax on the 2% transportation charges collected from NTPC. The appellant contested the liability for service tax, arguing that it did not issue any consignment note and that as per the rules, the recipient of service (NTPC) should be liable to pay service tax for Goods Transport Agency Services.

Issue 3: Applicability of Penalties and Interest
The appellant raised various grounds for appeal, including the applicability of penalties and interest. It argued against the sustainability of the demand and interest, citing provisions under section 80 of the Act regarding reasonable cause for failure.

Judgment Summary:
The Tribunal considered the submissions and records, focusing on whether the appellant was liable to pay service tax for Goods Transport Agency Service on the 2% transportation charges collected from NTPC. It was observed that the appellant's role was primarily related to supplying goods and providing services, including transportation to the site. The Tribunal concluded that the appellant was not providing Goods Transport Agency Service to NTPC and that if such service was provided, NTPC would be liable for service tax, not the appellant. Therefore, the impugned order confirming the demand was deemed unsustainable and set aside, granting consequential relief to the appellant.