Consignors liable for Service Tax on GTA services under reverse charge mechanism

The Tribunal held that the liability to pay Service Tax on GTA services rested with the consignors who initially paid the freight charges, following the reverse charge mechanism under Rule 2(1)(d)(v) of the Service Tax Rules 1994. Citing relevant precedents, the Tribunal set aside the Commissioner's order demanding Service Tax from the appellant and allowed the appeal with relief in accordance with the law.

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Issues: Liability to pay Service Tax on GTA services

Analysis:
The appeal was filed against an order passed by the Commissioner of Central Excise, Customs (Appeals)-Rajkot, demanding Service Tax along with penalty for the period June 2006 to July 2007. The dispute revolved around the liability to pay Service Tax on freight charges (GTA service) incurred by the appellant for bringing raw materials to their factory. The appellant argued that the liability rests on the consignor who paid the freight charges, even though later recovered from them. They relied on the reverse charge mechanism under Rule 2(1)(d)(v) of the Service Tax Rules 1994. The appellant cited precedents such as Tribunal Rajalaxmi Paper Mills Pvt Ltd Vs CCE, Madurai and Metal Seam Co Pvt Ltd Vs CCE, Lucknow to support their contention.

The Revenue, represented by the Authorized Representative, supported the findings of the Commissioner (Appeals) stating that since the freight amount was ultimately borne by the appellant, the liability to pay Service Tax rested on them as the consignee. They referred to the decision in Essar Logistics Ltd Vs CCE, Surat to justify their position. The relevant provision under Rule 2(d) of the Service Tax Rules 1994 was analyzed, which specifies that the person liable to pay freight for transportation of goods by road in a goods carriage is responsible for discharging the Service Tax. The Tribunal emphasized that the person who actually pays the freight charges is the one liable for the Service Tax, as established in the case law Essar Logistics Ltd vs CCE, Surat, following the precedent set by MSPL Ltd. Vs. CCE. In this case, since the consignors had initially paid the freight charges, the liability to pay Service Tax was deemed to rest on them. Consequently, the impugned order was set aside, and the appeal was allowed with relief as per the law.

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