2017 (9) TMI 361 - AT - Service Tax

GTA services - failure to take registration and pay Service Tax - The department entertained the view that the appellant was liable to pay Service Tax on the amounts received by them from Army/GREF for use of the vehicles under the category of Goods Transport Agency - penalty - Circular No.89/7/2006-ST dated 18.12.06 - Held that - The CBEC has clarified vide above Circular that activities performed by Government and its wings which are in public interest and is undertaken as mandatory and statutory function are not to be charged to Service Tax even if some amount is charged by way of for the provision of such activity. The appellant has made available vehicles for army and GREF in the state, such activity was in pursuance of public interest. Keeping in view the fact that Sikkim is a state bordering China we appreciate that the Government was bound to reach the necessities including food to people of Sikkim at the time of dislocation of traffic and when private crushers and trucks are taken away from the road - the activity performed is part of the statutory function of the State and hence in the light of the CBEC s Circular, cannot be considered as provision of taxable service. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of Service Tax amounting to ?1,24,66,261 for the period 2007-08 to 2011-12.
2. Imposition of penalties for failure to take registration and pay Service Tax.
3. Classification of activity as Goods Transport Agency Service and Rent a Cab Service.
4. Applicability of abatement on taxable value.
5. Interpretation of Circular No.89/7/2006-ST issued by the CBEC.
6. Determination of whether the activity falls within the scope of taxable service.

Analysis:
1. The appeals were filed against the Order-in-Original confirming the Service Tax amount and penalties. The appellant, a department under the Govt. of Sikkim, provided vehicles to the Army and GREF without issuing consignment notes. The department contended that Service Tax was payable on amounts received for vehicle usage under Goods Transport Agency and Rent a Cab categories. The appellant argued against the tax liability, citing the nature of services provided and potential abatement benefits under specific notifications.

2. The counsels for the appellant presented their case, emphasizing the absence of consignment notes and the unique circumstances of vehicle provision to the Army and GREF. The department's representative reiterated the findings of the Commissioner's order, supporting the imposition of Service Tax.

3. The adjudicating authority classified the activity as falling within the Goods Transport Agency Service. However, upon review, the Tribunal noted that the appellant, being a State Government department, provided vehicles in the public interest due to critical geographical and security considerations. The Tribunal referenced Circular No.89/7/2006-ST, stating that activities undertaken by government entities for statutory functions in the public interest are not taxable.

4. After considering the crucial role of the appellant's services in maintaining essential supplies and transportation during emergencies, the Tribunal concluded that the activity was part of the State's statutory function and in the public interest. Therefore, in alignment with the CBEC's Circular and the unique circumstances of the case, the Tribunal held that the service provided by the appellant was not subject to Service Tax.

5. Consequently, the Tribunal set aside the impugned orders, allowing the appeals in favor of the appellant. The judgment highlighted the public interest nature of the appellant's services, exempting them from the tax liability under the specific circumstances outlined in the Circular and the statutory function performed by the State Government department.