2016 (12) TMI 438 - AT - Service Tax

GTA service - reverse charge mechanism - whether the appellant/assessee is required to discharge the Service Tax liability on the inward freight paid by them to the lorry owners who transported the sugarcane from farmer to sugar factory under the category of Goods Transport Agency services or otherwise? - Held that - It is undisputed that the appellant is sugar factory and covered under the notification which mandated for discharge of Service Tax liability by them on the services received from goods transport agency. However, in the facts of the case in hand, it is noticed that undisputedly the appellant/assessee have paid the inward freight charges to individual truck owner, who transported sugarcane from farmer to their factory. It is also undisputed there was no consignment notes issued by the said truck owners. On the above factual matrix, we find that the learned Counsel the appellant/assessee has correctly relied upon the decision of Tribunal in the case of Nandganj Sihori Sugar Co. Ltd. 2014 (5) TMI 138 - CESTAT NEW DELHI , where it was held that When the transports did not issue consignment notes or GRs or Challans or any documents containing the particular as prescribed in Explanation to Rule 4B of the Service Tax Rules, 1994, the Transporters cannot be called Goods Transport Agency and, hence, in these cases, the service of transportation of sugarcane provided by the transporters would not be covered by Section 65(105)(zzp). As regards Revenue s appeal, we find that the Revenue is aggrieved by setting aside of the penalty by the first appellate authority. Since we have held in favour of appellant/assessee on merits itself, nothing survives in the appeal filed by the Revenue. Accordingly, Revenue s appeal is rejected. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Liability to pay Service Tax on Goods Transport Services under reverse charge mechanism.
2. Imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:

Issue 1: Liability to pay Service Tax on Goods Transport Services under reverse charge mechanism
The case involved a dispute regarding the liability of the appellant to pay Service Tax on Goods Transport Services during a specific period. The lower authorities had concluded that the appellant was liable to discharge the Service Tax liability with interest. However, the first appellate authority set aside the penalty imposed under Section 80 of the Finance Act, 1994. The main contention was whether the appellant, as a service recipient, was required to pay Service Tax on the inward freight paid to lorry owners transporting sugarcane to the appellant's factory. The appellant argued that they were not liable based on precedents like Nandganj Sihori Sugar Co. Ltd. and Bhima Sahakari Sakhar Karkhanba Ltd. The Tribunal examined the facts and legal provisions, emphasizing the definition of Goods Transport Agency and the requirement of issuing consignment notes. It was noted that the appellant had paid freight charges to individual truck owners without consignment notes being issued, which led to a finding that the appellant was not liable to pay Service Tax under the reverse charge mechanism. The Tribunal relied on previous judgments with similar facts and ruled in favor of the appellant, allowing their appeal.

Issue 2: Imposition of penalty under Section 78 of the Finance Act, 1994
The Revenue had appealed against the first appellate authority's decision to set aside the penalty under Section 78 of the Finance Act, 1994. However, since the Tribunal ruled in favor of the appellant on the main issue of Service Tax liability, it was held that nothing survived in the Revenue's appeal. Consequently, the Revenue's appeal was rejected. The Tribunal's decision was based on the finding that since the appellant was not liable to pay Service Tax, there was no basis for imposing the penalty under Section 78. Therefore, the appellant's appeal was allowed, and the Revenue's appeal was dismissed.

In conclusion, the Tribunal held that the appellant was not required to discharge the Service Tax liability on the inward freight paid to lorry owners for transporting sugarcane, as they did not fall under the definition of a Goods Transport Agency due to the absence of consignment notes. The decision was based on legal interpretations and precedents, ultimately leading to the allowance of the appellant's appeal and the rejection of the Revenue's appeal.