2009 (9) TMI 71 - AT - Service Tax

Exporters cleared of GTA service tax; no liability under Rule 2(1)(d)(v), penalties under Section 76 quashed

The Tribunal held that the appellant, engaged in export of iron ore, was not liable to service tax under GTA for transportation services received from ... Taxability of service tax - Goods Transport Agency (GTA) Service - liability of recipient - business of export of Iron Ore - penalty as the differential Service tax was imposed under Section 76 - HELD THAT:- We find that the appellants paid service tax under the head 'CTA' as recipient of GTA services in terms of Rule 2(1)(d)(v) of Service Tax Rules, 1994 during the material period. LMC received service of transportation of goods i.e. iron ore by the transporters. The Commissioner rejected the plea of the appellants that they had received service of transportation of goods either from owners of trucks or goods transport operators relying on the following statutory provision of Section 65(50b). We find that the claim of the appellants that the impugned services were not exigible to service tax is amply supported by the following extract of the Budget Speech of the Finance Minister, made while introducing the Finance Bill, 2004. From the pronouncement by the Finance Minister, the legislative intent not to tax truck owners or truck operators is beyond doubt. In the absence of a finding that the appellants had received the service of transport of goods from any GTA, the impugned demand of Service tax, and penalties are liable to be set aside. We also find that this Bench had observed in Final Order [2009 (3) TMI 130 - CESTAT, BANGALORE] that 'from the definition of the GTA and also the clarification given by the Finance Minister in the Budget Speech, we are of the view that the tax has been paid wrongly and the respondents are not liable to pay any Service tax'. This was in a case where differential Service tax had been demanded in respect of services received from individual truck owners. Thus, we set aside the impugned order and hold the appellants not liable to Service tax under the category of GTA during the material period and allow this appeal. Issues: Whether the appellants were liable to service tax under the category of Goods Transport Agency (GTA) for the period 01-01-2005 to 30-09-2006 and whether the penalties imposed under Sections 76 and 77 of the Finance Act, 1994 were liable to be sustained.Analysis: The appellants had paid service tax as recipients under the GTA head in ST-3 returns and claimed that the services received were from truck owners/operators and not from a goods transport agency. Statutory definitions and returns showed transport of goods by road, and some invoices indicated abatement; however, there was no conclusive finding establishing that the service providers were GTA entities as per the statute. The Budget Speech accompanying the Finance Bill, 2004 expressly indicated an intention not to levy service tax on truck owners or truck operators, which is relevant to the interpretation of the GTA levy. The record did not disclose mala fide intention to evade tax or adequately support invocation of the proviso to Section 73(1) to extend the limitation period. In light of the legislative clarification and absence of findings that services were received from a GTA, the tax demand and penalties could not be sustained.Conclusion: The appellants are not liable to service tax under the category of Goods Transport Agency for the material period, and the demands of service tax and penalties under Sections 76 and 77 are set aside; the appeal is allowed.