2009 (12) TMI 150 - AT - Service Tax

Truck owners win appeal: Not GTA services, demand time-barred, penalties unsustainable. Exemptions under review.

The Tribunal allowed the appeals, setting aside the impugned orders. It concluded that the transportation services provided by truck owners did not ... Goods Transport agency’s service- Notification No.29/2008-ST, dated 26.6.2008 and 34/2004, dated 3.12.2004- The assessee, a private mine, had incurred freight charges for transportation of iron ore by truck owners. The commissioner took the view that that the asseseee had not paid service tax under the category ‘ Goods transport agency services’. In the instant appeal, the assessee contended that transportation of goods by truck owners/ transporters without engagement/involvement of transport booking agent or goods transport agency was not liable to service tax. However commissioner allow the exemption under Notification No. 34/2004, dated 3.12.2004. Held that- in view of the clear language of the explanation to ‘Individual consignment’ used in the negotiation, the exemption is obviously admissible to goods transported as a single consignment for which the freight charged is not above Rs. 750. where the goods for the trip does not exceed Rs. 1500 per consignment, he is not eligible for exemption. In the circumstances, in which the assessee availed service of transportation by goods carriage not operated by GTA, were not liable to tax under the head ‘Goods Transport Agency Services’. Issues Involved:1. Whether the freight paid to owners and operators of trucks for transportation of goods by road is exigible to service tax under the head 'Goods Transport Agency' (GTA) service.2. Whether the demand for service tax is barred by limitation.3. Applicability of exemptions under Notification No. 34/2004-ST and Notification No. 36/2004-ST.4. Classification of the service as 'supply of tangible goods' under section 65(105)(zzzzj).5. Legitimacy of penalties imposed under sections 76, 77, and 78 of the Finance Act, 1994.Detailed Analysis:1. Freight Paid to Truck Owners and Operators:The primary issue was whether the freight paid to truck owners for transportation of goods by road falls under the taxable service of a Goods Transport Agency (GTA). The appellants argued that the truck owners were not GTAs as defined under section 65(50b) of the Finance Act, 1994, which specifies that a GTA must issue consignment notes. The Tribunal upheld this view, referencing the Finance Minister's Budget Speech, which clarified that there was no intention to levy service tax on truck owners or operators. The Tribunal also cited its earlier decision in the case of MSPL Ltd., which was accepted by the Department without challenge. Consequently, the Tribunal concluded that the impugned activity did not fall within the ambit of GTA services.2. Barred by Limitation:The appellants contended that the demand was barred by limitation, as the Department's audit in February 2006 had already noted the non-payment of service tax, and the show-cause notice was issued on 24-5-2007. The Tribunal found merit in this argument, noting that the Department was aware of the facts well before issuing the notice, thus invalidating the invocation of suppression of facts.3. Exemptions under Notification No. 34/2004-ST and Notification No. 36/2004-ST:The Tribunal examined the applicability of exemptions under Notification No. 34/2004-ST, which provides exemptions for consignments where the freight does not exceed Rs. 750 per individual consignment or Rs. 1,500 per goods carriage. The Commissioner had denied the exemption for amounts exceeding Rs. 750 per consignment, but the Tribunal upheld the Commissioner's interpretation. Additionally, the Tribunal noted that the appellants were eligible for exemptions under Notification No. 36/2004-ST for certain consignments but found this issue secondary to the primary finding that the service did not constitute GTA.4. Classification as 'Supply of Tangible Goods':The appellants argued that the service should be classified under 'supply of tangible goods' as defined in section 65(105)(zzzzj), effective from 16-5-2008. The Tribunal noted that the service of 'supply of tangible goods' was a distinct category introduced later and did not apply to the period under dispute. Therefore, this classification was not relevant for the current case.5. Legitimacy of Penalties:Given the Tribunal's findings that the service did not fall under GTA and the demand was barred by limitation, the penalties imposed under sections 76, 77, and 78 were also set aside. The Tribunal referenced the Larger Bench decision in ETA Engineering Ltd., which held that penalties are not imposable when there is a bona fide doubt regarding the taxability of the service.Conclusion:The Tribunal allowed the appeals, setting aside the impugned orders. It concluded that the transportation services provided by truck owners did not constitute GTA services, the demand was barred by limitation, and the penalties imposed were not sustainable. The exemptions under the relevant notifications were also addressed, but the primary finding rendered these discussions academic.