2019 (1) TMI 1170 - AT - Service Tax

Ancillary service to GTA service - transportation of goods by road service, cargo handling, weighment charges and trailer detention charges - applicability of Place of Provision Rules - Held that - It is a matter of record that the services as provided by the appellant, such as, empty transportation of containers, trader detention charges, cargo handling charges, weighment charges etc. are ancillary to the main activity of the transportation of the goods service - Since, it is a settled principle that the ancillary services are to be classified with the main service which is goods transport by road service in this case and as the bills have also been raised on the consignor or consignee who are paying the freight for the goods transportation then as per the provision of Section 68 readwith Rule 2 (1) (d) (5), the person who is paying the freight has to pay the service tax on the goods transport agency service inclusive of all the charges of ancillary services provided. The SCN itself has wrongly been issued to the appellant as the liability to pay the service tax on the goods transport agency service charges inclusive of ancillary services should have been raised on the person who has paid the freight - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability on transportation of goods by road service charges including ancillary services.

Analysis:
The appellant was registered under the taxable categories of cargo handling services, storage in warehousing services, and goods transport agency service. The Department alleged that the appellant did not discharge the service tax liability on amounts received for providing transportation of goods by road service, cargo handling, weighment charges, and trailer detention charges. A show cause notice was issued demanding service tax for the period from 01/04/2008 to 31/03/2011 under the category of transport of goods by road service. The order-in-original confirmed the service tax amount and imposed a penalty under Section 78 of the Finance Act, along with interest under Section 75. The Commissioner (Appeals) upheld the findings of the order-in-original, leading the appellant to appeal against the order-in-appeal dated 13 July 2016.

The appellant argued that the Department proposed the demand under the goods transport agency service category, considering charges like weighment, cargo handling, and empty container transportation as ancillary to the main service. The appellant contended that as per Circular No. 104/07/2008 and Notification No. 32/2004-ST, the value of ancillary services should be added to the main service of goods transport agency service. The appellant asserted that the service tax liability should fall on the consignor/consignee who paid the freight charges, as per Section 68 of the Finance Act, 1994, and Rule 2 (d) (5) of the Service Tax Rules, 1994. The appellant argued that the service tax on ancillary services for the transport of goods should be recovered from the service recipient who paid the freight charges.

The Tribunal noted that the services provided by the appellant, such as container transportation, trailer detention charges, cargo handling, and weighment charges, were ancillary to the main activity of transporting goods. According to Section 68 read with Rule 2 (d) (1) (5), the service recipient who paid the freight is liable to pay the service tax. As the charges for ancillary services were included in the same invoices as the transportation charges, billed to the consignor or consignee paying the freight, the Tribunal held that the person paying the freight must pay the service tax on the goods transport agency service, including ancillary service charges. The Tribunal concluded that the show cause notice was incorrectly issued to the appellant, as the liability for service tax on goods transport agency service charges, including ancillary services, should have been on the entity paying the freight.

Therefore, the Tribunal found the demand for service tax on the appellant unsustainable and set aside the impugned order-in-appeal, allowing the appeal.