2008 (8) TMI 32 - AT - Service Tax

Tribunal Overturns Tax Decision, Emphasizes Verification

The Tribunal set aside the Commissioner's decision confirming the demand for service tax, interest, and penalty on freight charges under Notification No. ... Appellant availing GTA services claimed the benefit of Not. 32/04 and were paying tax on 25% of value of freight charges – demand confirmed on ground of non-fulfillment of the conditions that the GTA did not avail the credit - only a doubt has been raised that the GTAs concerned might have availed credit – no verification has been made by Revenue - moreover appellant produced endorsements in the bills & declarations from concerned GTAs - appeal is allowed by way of remand Issues:Claim of benefit under Notification No. 32/2004-ST for service tax on freight charges.Analysis:The appellant, a manufacturer of transformers, switchgear, and parts, availed the services of Goods Transport Agency (GTA) and claimed the benefit of Notification No. 32/2004-ST for paying service tax on freight charges. However, a show cause notice was issued, alleging non-compliance with the conditions of the notification, specifically the lack of evidence that the GTAs did not avail credit on inputs or capital goods. The demand for service tax, interest, and penalty was confirmed by the Commissioner.The appellant argued that the exemption notification's conditions should be fulfilled by the GTAs, not personally by them. They provided endorsements on some bills/invoices and certificates from GTAs stating non-availment of credit. The appellant contended that they substantially complied with the conditions and referred to a clarification modifying the procedure for past cases.The Department insisted that the appellant must prove compliance with the notification's conditions, as they were availing the benefit. They highlighted the instructions regarding fulfilling the conditions and the relaxation of endorsement requirements for a specific period.The Tribunal observed that the liability to pay tax for GTA services could be on the consignee, consigner, or GTA. The benefit under Notification No. 32/2004 was subject to the condition of non-availability of cenvat credit by the concerned GTAs. While doubts were raised about GTAs availing credit, no allegations or findings were made. The Tribunal criticized the lack of verification by the Department and emphasized the importance of verifying claims before confirming demands. Consequently, the impugned order was set aside, and the matter was remanded for necessary verification and consideration of relevant clarifications. The appeal was allowed by way of remand, and the stay petition was disposed of.In conclusion, the Tribunal's decision focused on the proper fulfillment of conditions under the notification, the responsibility to prove compliance, and the necessity of verification before confirming demands related to service tax on freight charges under Notification No. 32/2004-ST.