Manufacturer not liable for service tax on transport: consignor responsible.

The appellant, a manufacturer of plastic items, received LDPE and LLDPE granules from M/s Reliance Industries. The department demanded service tax on GTA service received by the appellant. The jurisdictional Assistant Commissioner confirmed the demand, but the appellant argued that the consignor, M/s Reliance Industries, who arranged the transport and paid the freight, should be liable for service tax. The Commissioner (Appeals) upheld the decision, but it was found that as the consignor paid the freight, they were liable for the service tax, not the appellant. The service tax demand, interest, and penalty were waived, and recovery stayed pending appeal.

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Issues:
Demand of service tax on GTA service received by the appellant.

Analysis:
The appellant, a manufacturer of plastic items, received LDPE and LLDPE granules from M/s Reliance Industries. The department issued a show cause notice for service tax demand on GTA service received by the appellant. The jurisdictional Assistant Commissioner confirmed the demand under Section 73 of the Finance Act, 1994, along with interest and imposed a penalty. The Commissioner (Appeals) upheld this decision. The appellant argued that as per Notification No. 35/04-ST, the consignor M/s Reliance Industries, who arranged the transport and paid the freight, should be liable for service tax, not the appellant. The appellant requested a waiver of dues for the appeal hearing and a stay on recovery.

The Service Tax Rules define the "person liable to pay service tax" for goods transport agency services. The rule specifies that the person liable to pay service tax is the one who pays or is liable to pay freight for the transportation of goods. The Notification No. 35/2004-ST issued under the Finance Act, 1994, mirrors this rule. In this case, both the consignor and consignee are body corporates. Therefore, the entity liable to pay service tax for the GTA service received is the one liable to pay the freight. As M/s Reliance Industries engaged the transporter and paid the freight, they are the ones liable to pay the service tax, not the appellant. The appellant did not engage the transporter or act as an agent for freight payment. Therefore, the service tax demand, interest, and penalty are waived for the appeal hearing, and recovery is stayed until the appeal's disposal. The stay application is allowed.

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