Reverse charge on Goods Transport Agency services: liability sustained for normal limitation; extended period and penalties set aside.

Appellants received freight for transportation of granite blocks through goods transport agencies (GTA); trucks were engaged by GTAs and freight was collected and recorded by the GTAs. The legal determination applies the reverse charge mechanism to GTA services received, allowing the appellants (100% EOUs) to claim cenvat credit for service tax reflected in their books. Consequently the service tax demand is sustainable only for the normal period of limitation; invocation of the extended limitation period is rejected. Because the issue turned on contemporaneous interpretation of law, penalties imposed are held unsustainable and are set aside.

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Issues: Whether appellants are liable to pay service tax under reverse charge mechanism for goods transport agency (GTA) services received for transportation of granite blocks, and whether the extended period of limitation and penalty could be invoked against the appellants.

Analysis: The appeals concern whether the freight services received were services of individual truck operators or services provided by goods transport agencies who engaged trucks and collected freight from the appellants. Records showed that trucks were engaged by goods transport agencies and the freight payments were collected and recorded in the appellants' books. The appellants, being 100% EOUs, had the freight payments and related service tax entries reflected in their books and were eligible to avail cenvat credit for service tax payable on such freight under reverse charge. In these circumstances the demand for service tax could only be sustained for the normal period of limitation; invocation of the extended period was not justified. As the question involved interpretation of law at the relevant time, imposition of penalty was held unsustainable.

Conclusion: Service tax on GTA services received is leviable on the appellants under the reverse charge mechanism and the demand is confirmed for the normal period of limitation; the demand raised for the extended period of limitation is set aside and the penalties imposed are set aside (appeals partially allowed in favour of the appellants to this extent).

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