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2025 (4) TMI 181 - AT - Service TaxLiability of appellant to pay Service Tax on freight charges paid for locally hired vehicles in the absence of consignment notes under the transportation of goods by road (GTA) service as per the reverse charge mechanism - penalty - HELD THAT - As per Rule 2(1)(d)(v) Of the Service Tax Rules 1994 read with Notification No. 35/2004-S.T. dated 03.12.2004 in relation to taxable service provided by a goods transport agency the consignor / consignee who is making payment towards freight either himself or through his agent would be liable to pay Service Tax if the consignor / consignee of the goods falls under one of the seven categories mentioned therein. Thus even if the consignor or consignee falls within the ambit of one of the seven categories mentioned in the Notification No. 35/2004-S.T. dated 03.12.2004 the liability to pay service tax on reverse charge arises only when they receive the transportation service from a goods transport agency who issues consignment notes. The appellant has hired vehicles from local vehicle providers who have not issued any consignment notes. Hence they cannot be considered as goods transport agency within the meaning of Section 65(50b) of the Finance Act 1994. The liability of the appellant to pay Service Tax under the category of transportation of goods by road (GTA) service arises only when the appellant receives services from a goods transport agency who issues a consignment note by whatever name it may be called. In these circumstances the appellant is not liable to pay Service Tax under the category of GTA service in respect of the expenditure incurred by them for transportation of goods during the period from 2004-05 (from January) to 2008-09 (up to December) as the services were not received from a GTA who issues consignment notes. Penalty - HELD THAT - Since the demand raised against the appellant does not survive the penalty imposed on the appellant under Section 78 of the Finance Act 1994 is not sustainable. Further since there is no liability to pay Service Tax on the part of the appellant in this case there is no need to take registration and file returns and hence penalty imposed under Section 77 of the Act is not sustainable. Conclusion - The appellant is not liable to pay Service Tax on the transportation service received by them under reverse charge mechanism. Penalty also set aside. The impugned order is set aside - appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment is whether the appellant is liable for payment of Service Tax on freight charges paid for locally hired vehicles in the absence of consignment notes under the 'transportation of goods by road' (GTA) service, as per the reverse charge mechanism outlined in the Finance Act, 1994 and relevant notifications. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework revolves around Section 65(50b) of the Finance Act, 1994, which defines a 'goods transport agency' as any person providing service in relation to the transport of goods by road and issuing consignment notes. Rule 2(1)(d)(v) of the Service Tax Rules, 1994 read with Notification No. 35/2004-S.T. dated 03.12.2004 mandates the consignor or consignee to pay Service Tax under the reverse charge mechanism if they receive services from a goods transport agency issuing consignment notes. The appellant cited the decision in Narendra Road Lines Pvt. Ltd. v. Commissioner of Cus., C.Ex. & C.G.S.T., Agra, where similar demands were set aside. Court's Interpretation and Reasoning The Tribunal interpreted that the liability to pay Service Tax under the reverse charge mechanism arises only when the appellant receives services from a 'goods transport agency' that issues consignment notes. The Tribunal observed that the appellant hired vehicles from local providers who did not issue consignment notes, thus not qualifying as a 'goods transport agency' under Section 65(50b) of the Finance Act, 1994. Key Evidence and Findings The appellant provided evidence that the local vehicle providers did not issue consignment notes, which is a requirement for classification as a 'goods transport agency.' Additionally, the appellant submitted a Chartered Accountant's certificate indicating that many transportation charges were below the thresholds for abatement under Notification No. 34/2004-S.T. Application of Law to Facts The Tribunal applied the law by determining that the absence of consignment notes meant the local vehicle providers did not meet the definition of a 'goods transport agency.' Consequently, the appellant was not liable to pay Service Tax under the reverse charge mechanism for services received from these providers. Treatment of Competing Arguments The Tribunal considered the Revenue's reiteration of the findings in the impugned order but found the appellant's reliance on the precedent set by the Narendra Road Lines case to be compelling. The Tribunal noted that the facts of the present case aligned with the precedent, supporting the appellant's argument that they were not liable for the Service Tax demanded. Conclusions The Tribunal concluded that the appellant was not liable to pay Service Tax under the GTA service category for the transportation services received from local vehicle providers who did not issue consignment notes. Consequently, the demand and penalties imposed by the lower authorities were not sustainable. SIGNIFICANT HOLDINGS The Tribunal established the principle that liability under the reverse charge mechanism for GTA services requires the issuance of consignment notes by the service provider. The Tribunal held: "The liability of the appellant to pay Service Tax under the category of 'transportation of goods by road' (GTA) service arises only when the appellant receives services from a goods transport agency who issues a consignment note, by whatever name it may be called." Further, the Tribunal held that since the demand did not survive, the penalties under Sections 77 and 78 of the Finance Act, 1994 were also unsustainable. The Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant.
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