2025 (7) TMI 216 - AT - Service Tax

Classification of service - transportation of goods by road where consignment note is not issued or GTA Service? - negative listed service - reverse charge mechanism - HELD THAT - In this case it is a fact that the Appellant is a proprietorship concern with a single truck providing transportation services without issuing consignment notes. Thus it is observed that the appellant cannot be classified as a Goods Transport Agency. Therefore the services provided by the Appellant fall squarely within the Negative List and hence the said activity is not taxable. The services provided for transportation of goods in individual capacity fall within the ambit of negative list as provided under Section 66D of the Finance Act. In this case the Appellant being a small sole proprietorship concern with a single truck providing transportation services without issuing consignment notes cannot be classified as a GTA. Therefore the services provided fall squarely within the negative list and are not taxable - the Appellant has submitted that even if the services are considered as GTA services no tax is payable by them. There are merit in the submission of the Appellant. In this case the appellant has provided transportation services to M/s. Balmer Lawrie Ltd. which is a Government company and hence M/s. Balmer Lawrie Ltd. are liable to pay service tax under Reverse Charge Mechanism. Since the individual consignment values as admitted in the Order-in-Appeal itself are Rs. 750/- and Rs. 1400/- which are below the exemption limit of Rs. 1500/- no service tax is payable on these services. The demands of service tax confirmed in the impugned order is not sustainable the same is set aside - appeal allowed.

Summary

Issues Presented and Considered

The core legal questions considered by the Tribunal are:

1. Whether the appellant, a sole proprietorship concern providing transportation services by road without issuing consignment notes and owning a single truck, can be classified as a Goods Transport Agency (GTA) liable to pay service tax under the Finance Act.

2. Whether the transportation services rendered by the appellant fall within the Negative List of services under Section 66D(p)(i)(A) of the Finance Act and are therefore not taxable.

3. If the appellant is considered a GTA, whether the service tax liability arises on the appellant or on the recipients of the service under the Reverse Charge Mechanism, particularly in relation to services provided to a government company.

4. Whether exemption under Notification No. 25/2012-ST applies to the transportation services where the gross amount charged per consignment is below Rs. 1500/-.

5. Consequent to the above, the validity of the demand of service tax, interest, and penalty confirmed by the adjudicating and appellate authorities.

Issue-wise Detailed Analysis

Issue 1 & 2: Classification of the Appellant as a GTA and Applicability of Negative List

Legal Framework and Precedents: Section 66D(p)(i) of the Finance Act defines the Negative List of services exempt from service tax, which includes services by way of transportation of goods by road except those provided by a Goods Transport Agency (GTA) or a courier agency. A GTA is generally characterized by the issuance of consignment notes and the operation of transportation services on behalf of other parties.

Precedents cited by the appellant include rulings where small proprietorship concerns providing transportation services without consignment notes were held not to be GTAs and thus exempt from service tax under the Negative List. These include decisions from the CESTAT Kolkata and Ahmedabad benches.

Court's Interpretation and Reasoning: The Tribunal observed that the appellant is a sole proprietorship concern operating a single truck and providing transportation services without issuing consignment notes. The Department did not dispute the nature of the service but sought to classify the appellant as a GTA to levy service tax.

The Tribunal held that the appellant cannot be classified as a GTA because the essential characteristic of a GTA-issuing consignment notes and operating as an intermediary transporting goods for others-is absent. Therefore, the transportation services fall within the Negative List under Section 66D(p)(i)(A) and are not taxable.

Application of Law to Facts: The appellant's mode of operation and the absence of consignment notes were determinative. The Tribunal relied on the statutory language and judicial precedents to conclude that the appellant's services are exempt.

Treatment of Competing Arguments: The Revenue's insistence on classification as a GTA was rejected due to lack of evidence of consignment note issuance or GTA characteristics.

Conclusion: The appellant's services are covered under the Negative List and are not liable to service tax.

Issue 3: Reverse Charge Mechanism Liability

Legal Framework: Notification No. 30/2012-ST specifies that service tax on GTA services is payable under the Reverse Charge Mechanism (RCM) by the recipient if the recipient falls within specified categories such as a body corporate or government company.

Court's Reasoning: The appellant provided transportation services to a government company, which under the Notification is liable to pay service tax under RCM. The appellant contended that the liability to pay service tax on services rendered to such entities lies on the recipient and not on the service provider.

Application to Facts: Since Balmer Lawrie Ltd. is a government company, the Tribunal accepted that the service tax liability, if any, on transportation services rendered to it would be on Balmer Lawrie Ltd. under RCM.

Treatment of Competing Arguments: The Revenue did not effectively counter this submission, and the Tribunal found merit in the appellant's argument.

Conclusion: For services rendered to government companies, the appellant is not liable to pay service tax; the liability rests on the recipient under RCM.

Issue 4: Exemption Based on Consignment Value

Legal Framework: Notification No. 25/2012-ST exempts services by a GTA where the gross amount charged for transportation of goods on a consignment does not exceed Rs. 1500/-.

Key Evidence and Findings: The appellant submitted cash ledger entries showing receipts of Rs. 750/- and Rs. 1400/- for individual consignments, which are below the exemption threshold.

The Order-in-Appeal itself recorded these figures, implicitly acknowledging the exemption claim.

Court's Reasoning: The Tribunal held that since the individual consignment values are below Rs. 1500/-, the services are exempt from service tax under the Notification.

Application of Law to Facts: The exemption applies even if the appellant were considered a GTA, which the Tribunal had already rejected. Thus, this exemption further supports the appellant's non-liability.

Conclusion: No service tax is payable on consignments where the gross amount charged is below Rs. 1500/-.

Issue 5: Demand of Service Tax, Interest, and Penalty

Court's Reasoning: Since the Tribunal held that the appellant's services are not taxable and that the service tax liability, if any, lies with the recipients under RCM, the demand of service tax confirmed by the adjudicating and appellate authorities is unsustainable.

Consequently, interest and penalty based on the demand also cannot be sustained.

Conclusion: The demand of service tax, interest, and penalty is set aside.

Significant Holdings

"I observe that the appellant cannot be classified as a Goods Transport Agency. Therefore, I find that the services provided by the Appellant fall squarely within the Negative List and hence the said activity is not taxable."

"Since the individual consignment values, as admitted in the Order-in-Appeal itself, are Rs. 750/- and Rs. 1400/-, which are below the exemption limit of Rs. 1500/-, I hold that no service tax is payable on these services."

"The appellant has provided transportation services to M/s. Balmer Lawrie Ltd., which is a Government company and hence, M/s. Balmer Lawrie Ltd. are liable to pay service tax under Reverse Charge Mechanism."

"Accordingly, I hold that the demands of service tax confirmed in the impugned order is not sustainable and hence I set aside the same. Since the demand of service tax is not sustained, the question of demanding interest or imposing penalty does not arise."

Core Principles Established:

1. A sole proprietorship concern providing transportation services by road without issuing consignment notes and operating a single truck does not qualify as a Goods Transport Agency for service tax purposes.

2. Transportation services provided by such entities fall under the Negative List of services under Section 66D(p)(i)(A) of the Finance Act and are not taxable.

3. Where transportation services are provided to government companies or specified entities, service tax liability arises on the recipient under the Reverse Charge Mechanism, not on the service provider.

4. Services provided by a GTA where the gross amount charged per consignment does not exceed Rs. 1500/- are exempt from service tax as per Notification No. 25/2012-ST.

5. Demands of service tax, interest, and penalty based on misclassification or non-consideration of exemptions are liable to be set aside.

Final Determinations:

The appeal is allowed. The demand of service tax, interest, and penalty confirmed against the appellant is set aside. The appellant's transportation services are held to be non-taxable under the Negative List, and where applicable, the service tax liability lies on the recipient under Reverse Charge Mechanism. Exemptions for consignments below the threshold amount are also upheld.