Service tax on transportation charges fails where tax was already paid, outward freight was linked to sales, and book provisions were unsupported.

Transportation-related service tax demand was found unsustainable where records showed part-payment through challans, one component had already suffered tax at the transporter's end, freight paid sales and payments to Container Corporation of India related to outward freight on sold goods rather than an independent taxable service liability, and demand based only on book provisions for freight expenses could not stand when later invoices showed lower actual freight with tax paid on the actual amount. The confirmed demand was set aside.

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Issues: Whether the service tax demand confirmed on transportation charges was sustainable where part of the demand was shown as already paid, part was found to have been discharged by the transporter, part related to freight paid sales, part was attributable to payment made to Container Corporation of India for outward freight on sale of goods, and part arose only from provisions for freight expenses.

Analysis: The records showed challans evidencing payment of Rs. 12,99,559, which had not been considered below. The invoices also showed that service tax on one component of transportation service had been paid by the transporter. The freight paid sale component and the freight paid to Container Corporation of India were linked to outward transportation of sold goods, and not to an independent taxable service liability of the appellant. For the provision-based demand, the appellant was held liable only on actual transportation charges and not on mere book provisions, where the later invoices reflected lower actual freight with tax already paid on the actual amount.

Conclusion: The entire confirmed demand was held unsustainable and was set aside.

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