Reverse charge service tax on GTA freight denied where sole proprietorship fell outside notified categories; refund sustained.
A sole proprietorship not covered by the notification categories for reverse charge on Goods Transport Agency freight was not liable to pay service tax, because the liability was confined to specified entities such as factories, companies, corporations, societies, co-operative societies, registered dealers, and body corporates or registered partnership firms. The amount paid under this mistaken belief was treated as a deposit rather than tax lawfully due, so refund could not be defeated by limitation. The plea of unjust enrichment also failed because the retention lacked authority of law. The refund granted to the assessee was sustained.
Issues: (i) Whether a sole proprietorship concern, not falling within the categories specified in the notification, was liable to pay service tax on Goods Transport Agency services on freight payments made by it; (ii) Whether the amount paid under such mistaken liability could be denied refund on the grounds of limitation and unjust enrichment.
Issue (i): Whether a sole proprietorship concern, not falling within the categories specified in the notification, was liable to pay service tax on Goods Transport Agency services on freight payments made by it.
Analysis: The notification and the Board circular restricted liability to the persons specifically enumerated therein, namely factories, companies, corporations, societies, co-operative societies, registered dealers of excisable goods, and body corporates or registered partnership firms. The evidence showed that the assessee was a sole proprietorship concern and therefore did not fall within any of the notified categories. On that basis, the freight-related service tax was not payable by the assessee.
Conclusion: The assessee was not liable to discharge service tax on the Goods Transport Agency service in the facts of the case.
Issue (ii): Whether the amount paid under such mistaken liability could be denied refund on the grounds of limitation and unjust enrichment.
Analysis: Once it was found that the assessee was not legally bound to pay the tax, the amount collected by the department was treated as a deposit and not as tax lawfully levied. On that premise, the bar of limitation did not apply, and the plea of unjust enrichment also failed because the retention itself lacked authority of law.
Conclusion: The refund could not be denied on limitation or unjust enrichment grounds.
Final Conclusion: The departmental challenge failed, and the refund granted to the assessee was sustained.
Ratio Decidendi: When service tax is collected from a person not covered by the governing notification, the amount is an unauthorized deposit recoverable by refund, and limitation or unjust enrichment cannot defeat restitution.
TaxTMI 
AI Drafter ✕
TaxTMI 
