2025 (2) TMI 627 - AT - Service Tax

Service tax demand on GTA services set aside as liability shifts to recipients under law

CESTAT Chennai set aside service tax demand on GTA services for April 2008-March 2013 period. The appellant provided services to companies registered ... Levy of service tax for providing GTA service - period involved is from April 2008 to March 2013 - HELD THAT:- The adjudicating authority has recorded in the impugned OIO that it is the appellant’s stand that they are providing services to companies who are registered under the Companies Act, 1956. It is also seen from the appellants’ replies to the SCNs that it is also their stand that they have clearly stated in their invoices that the service tax liability will be paid by either consignor or consignee and had enclosed sample invoices for the adjudicating authority’s verification along with complete parties list and service amount for reference. While the adjudicating authority acknowledges that the documentary evidences adduced by the appellant have been perused, these contentions of the appellant have not been disputed or contested by the adjudicating authority. From the legal provisions, it is therefore evident that such companies, private or limited would get covered under the specified entities/categories stated in the notifications for the respective periods either as a company or as a body corporate. The adjudicating authority has erred in confirming the demand of service tax on GTA services made on the appellant for the reason that coastal energy private limited and fossil logistics private limited had not responded to the subsequent letters of DGCEI sent to them on 05-09-2013. It was incorrect on the part of the adjudicating authority to take up cudgels on behalf of the investigating agency DGCEI, who are amply empowered under statute to collect evidence in case they deem it so necessary, by way of issuance of summons under Section 14 of the Central Excise Act, 1944 of which they would be undoubtedly aware of - As regards the finding of the adjudicating authority on lack of details required as per Rule 4B that ought to figure in a consignment note in the invoices issued by the appellant, in the absence of stating what were the details that have been found deficient or absent, it is unable to appreciate the import of such finding, except that the invoices were lacking certain details that ought to have been there in a consignment note, which is a venial breach. In any event indisputably the appellant has been rendering the GTA services for which it is registered. The adjudicating authority grossly erred in confirming the demand of service tax on GTA services on the appellant on the ground that the appellant has not proved that the service tax has been paid by the recipients. When the position in law as emanating from the discussions above is that the onus of discharging the service tax on GTA services received itself, was on the customers of the appellant, then such a confirmation of demand as has been made in the instant case, cannot be sustained and the demand on GTA services to the extent of the amounts stated as disputed in this appeal by the counsel for the appellant, from the demand confirmed by the adjudicating authority is set aside. The appellant has produced a chartered accountant’s certificate certifying that the amounts were indeed written off as bad debts and finding no valid objection raised as to the acceptance of the same or any reason to disbelieve the same, such certification by an independent professional lends credence to the appellant’s contentions in this regard and consider it sufficient to drop the demand. The penalties imposed on the appellant under Section 78 and Section 76 do not sustain. There are no grounds urged in the appeal or any specific contention advanced by the counsel against the demand of Rs.14,200/- for the delay in filing of returns as well as the total penalty of Rs.10000/- under section 77 imposed on the appellant and we are therefore of the view that in the facts and circumstances of this case these need to be left without interference. HELD THAT:- i) The liability to pay service tax on GTA services can shift from the service provider to the service recipient under specified conditions, and that the service provider is not responsible for ensuring the service recipient fulfills their tax obligations. ii) The demand related to bad debts was dropped, and penalties under Sections 76 and 78 were nullified. Appeal disposed off. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the appellant, M/s. Seaport Logistics Pvt Ltd, is liable to pay service tax on Goods Transport Agency (GTA) services provided during the period from April 2008 to March 2013.Whether the demand of Rs.48,252/- pertaining to reconciliation of bad debts for the period April 2008 to March 2012 is sustainable.The validity of penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994.Whether the demand for delay in filing ST-3 returns is justified.ISSUE-WISE DETAILED ANALYSIS1. Liability to Pay Service Tax on GTA ServicesRelevant Legal Framework and Precedents: The legal framework during the period involved includes Section 68 of the Finance Act, 1994, which outlines the obligation to pay service tax. Notification No.36/2004 ST and Rule 2(1)(d)(v) of the Service Tax Rules, 1994, specify that the liability to pay service tax for GTA services is on the service recipient under certain conditions.Court's Interpretation and Reasoning: The Tribunal examined the legal provisions and concluded that the liability to pay service tax for GTA services, under the specified conditions, shifts from the service provider to the service recipient. The Tribunal noted that the appellant provided services to companies covered under the specified entities/categories, thereby shifting the tax liability to those companies.Key Evidence and Findings: The appellant provided documentary evidence, including invoices and letters from clients, confirming that the clients discharged the service tax liability. The Tribunal found these documents credible and noted that the adjudicating authority did not dispute the appellant's contentions or evidence.Application of Law to Facts: The Tribunal applied the legal provisions to the facts and determined that the appellant was not liable to pay service tax on the GTA services provided, as the liability was on the service recipients.Treatment of Competing Arguments: The Tribunal rejected the adjudicating authority's reasoning that the appellant was liable due to the non-response of certain companies to queries from the Directorate General of Central Excise Intelligence (DGCEI). The Tribunal emphasized that the onus was on the DGCEI to pursue the matter with the companies, not on the appellant.Conclusions: The Tribunal set aside the demand for service tax on GTA services, as the appellant successfully demonstrated that the liability was on the service recipients.2. Demand Pertaining to Reconciliation of Bad DebtsRelevant Legal Framework: Service tax was payable on a realization basis during the relevant period.Court's Interpretation and Reasoning: The Tribunal considered the appellant's submission of a chartered accountant's certificate confirming the amounts written off as bad debts.Key Evidence and Findings: The Tribunal found no valid objection to the acceptance of the chartered accountant's certificate and considered it sufficient evidence.Conclusions: The Tribunal dropped the demand of Rs.48,252/- related to bad debts.3. Penalties and Other DemandsPenalties under Sections 76, 77, and 78: The Tribunal found no justification for the penalties under Sections 76 and 78, given that the primary demand for service tax on GTA services was set aside. However, the penalties under Section 77 and the demand for delay in filing ST-3 returns were upheld, as no specific contentions were advanced against these.Conclusions: The penalties under Sections 76 and 78 were set aside, while the penalties under Section 77 and the demand for delay in filing returns were upheld.SIGNIFICANT HOLDINGSCore Principles Established: The Tribunal reaffirmed the principle that the liability to pay service tax on GTA services can shift from the service provider to the service recipient under specified conditions, and that the service provider is not responsible for ensuring the service recipient fulfills their tax obligations.Final Determinations: The demand for service tax on GTA services was set aside, the demand related to bad debts was dropped, and penalties under Sections 76 and 78 were nullified. The penalties under Section 77 and the demand for delay in filing returns were maintained.Verbatim Quote: 'The adjudicating authority grossly erred in confirming the demand of service tax on GTA services on the appellant on the ground that the appellant has not proved that the service tax has been paid by the recipients.'