2025 (7) TMI 1074 - AT - Service Tax

Classification of services - Goods transport agency - transportation service providers where consignment note is not issued - reverse charge mechanism - HELD THAT - In this case the appellant which is a sole proprietorship concern has engaged in the activity of transportation of various materials to various destinations by road using its own truck. Further it is also a fact borne on record that no consignment notes were issued by the appellant in relation to the above activity undertaken by them. Therefore it is clear that the appellant falls outside the purview of Goods Transport Agency . Accordingly the argument advanced by the appellant agreed upon that they are not liable to pay Service Tax on the said activity being covered under the Negative List in terms of Section 66D of the Finance Act 1994. It is observed that service tax is liable to be paid for transportation service only when such service is rendered by a Goods Transport Agency which issues Consignment Note . In this case it is a fact on record that the appellant was not issuing Consignment Note . Accordingly the activity undertaken by them are covered within the ambit of Negative List in terms of Section 66D of the Finance Act 1994 and hence the appellant is not liable to pay Service Tax on the services rendered by them to M/s. Coalsale Company Ltd. The demand of Service Tax confirmed against the appellant is not sustainable. Consequently the demand of interest and imposition of penalties also do not survive. The impugned order is set aside - appeal allowed.

Summary

ISSUES:

Whether a sole proprietorship concern engaged in transportation of goods by road without issuing consignment notes qualifies as a "Goods Transport Agency" (GTA) liable to pay Service Tax under the Finance Act, 1994.Whether transportation services provided without issuance of consignment notes fall under the Negative List of services exempt from Service Tax under Section 66D of the Finance Act, 1994.Whether Service Tax liability arises on the appellant when the ultimate service receiver has discharged Service Tax under the Reverse Charge Mechanism.Whether interest and penalties can be imposed when the primary Service Tax demand is not sustainable.

RULINGS / HOLDINGS:

The appellant, being a sole proprietorship concern providing transportation services by road without issuing consignment notes, does not qualify as a "Goods Transport Agency" and thus is not liable to pay Service Tax on such services.Such transportation services without issuance of consignment notes are covered under the Negative List as per Section 66D(p)(i) of the Finance Act, 1994, which exempts "services by way of transportation of goods by road except the services of a goods transportation agency or a courier agency."Since the ultimate service receiver has discharged Service Tax under the Reverse Charge Mechanism, no Service Tax liability is cast on the appellant for the transportation services rendered.Consequently, as the demand of Service Tax is not sustainable, the imposition of interest and penalties also does not survive and must be set aside.

RATIONALE:

The Court applied the statutory framework under the Finance Act, 1994, specifically Section 66D which lists the Negative List of services exempt from Service Tax, including transportation of goods by road except when rendered by a GTA issuing consignment notes.The Court relied on precedents from the Tribunal which held that sole proprietorship concerns operating single trucks without issuing consignment notes do not fall within the definition of GTA and thus their services are non-taxable under the Negative List.The Court recognized the applicability of the Reverse Charge Mechanism wherein the ultimate service receiver is liable to pay Service Tax, thereby absolving the service provider from tax liability in such cases.The decision reflects consistency with prior Tribunal rulings and affirms that interest and penalties cannot be sustained absent a valid tax demand, negating any doctrinal shift or dissenting opinion.