2023 (6) TMI 302 - AT - Service Tax

Levy of Service Tax - GTA Services - goods are transported by rail - liability of appellant to pay tax on Freight Charges - consignor has discharged service tax on freight charges - applicability of Reverse Charge Mechanism - period 1.6.2006 to 16.8.2006 - Extended period of limitation - demand of service tax with interest and equal penalty under section 78 of the Finance Act, 1994 - HELD THAT - The appellant has collected freight charges only for transportation of goods by road from the service recipient. They had to opt for transportation of goods by rail due to unforeseen circumstances such as unavailability of lorries. The intention between the parties, namely service recipient and service provider, was not to provide transportation of goods by rail. From the invoices issued by the appellant to the service recipient namely M/s. Sterlite Industries (India) Ltd., it is seen that the appellant has collected only freight charges for transportation by road as agreed between the parties. It is also seen mentioned in the invoices that the service tax is payable by consignor. Undisputedly, the consignor, namely, M/s. Sterlite Industries (India) Ltd. has discharged the service tax on the freight charges for transportation of goods by road. Merely because the appellant had to use the rail transportation in certain occasions, it cannot be said that they have provided services of transportation of goods by rail. Further, the service tax on the rail freight charges also has been discharged. For these reasons, it is found that there is no legal basis for the demand raised in the Show Cause Notice - the demand cannot sustain and requires to be set aside. Appeal allowed.

Summary

Issues Involved:
The issue involves the demand of service tax raised under the category of Goods Transport Agency Service for the period from 1.6.2006 to 16.8.2006 on the freight charges for transport of goods by rail.

Comprehensive Details:
The appellant, a transporter, was alleged to have provided Goods Transport Agency (GTA) services to a company from June 2006 to August 2006. The appellant transported goods by rail due to a shortage of lorries, even though their usual mode was road transport. The service recipient paid the service tax on the freight charges for road transportation, and the appellant also paid service tax on the rail freight charges. The department issued a Show Cause Notice demanding service tax for the rail transportation period, alleging suppression of facts. The appellant contended that they did not contract for rail transport, only used it when necessary, and the service recipient paid the applicable service tax. They also argued that the demand did not consider the abatement allowed under Notification No. 1/2006 and was time-barred.

The Tribunal found that the appellant only collected freight charges for road transportation and had not entered into any agreement for rail transport with the service recipient. The invoices clearly indicated that the consignor was liable to pay service tax, which was done by the service recipient for road transportation. The Tribunal concluded that the demand for service tax on rail freight charges was not sustainable as the appellant had already paid the applicable service tax. The demand was set aside, and the appeal was allowed with consequential relief, if any.

Separate Judgement:
No separate judgment was delivered by the judges in this case.