Service Tax on Truck owner

[Kaustubh Karandikar]

XYZ(Proprietor) is owning trucks / tempos which is given on hire to a Goods Transport Agency. Is XYZ required to pay service tax on the amount received from GTA? XYZ had received a Show Cause Notice for the past period on this issue. In my view XYZ is not required to pay service tax being exempted under Sr.No.22 of Notification No.25/20212 ST. Views of the experts please.

[Ganeshan Kalyani]

Sir, as per the entry cited by you, the service is exempt.

[KASTURI SETHI]

Dear Sir,

I agree with Sh.Ganeshan Kalyani Ji. I have checked all the notifications amending Notification No. 25/12-ST dated 20.6.12. Serial no.22 remains unamended till 30.7.17

I presume that SCN must have been issued on the basis of differential value declared in ST-3 returns and Income Tax Returns. Secondly, pl confirm under which category of service ST has been demanded.

Pl. clarify.

[Amit Agrawal]

Shri Kaustubh Karandikar Ji,

I also agree with you and my professional colleague about service tax being exempted under Sr. No.22 of Notification No.25 / 2012 - ST.

Kindly make sure that reply to SCN carrying enough documentary evidences to substantiate the fact that all service-recipient/s were GTA.

Depending upon 'hiring agreement', one can also try and see if 'Right to use these trucks / tempos' were transferred from XYZ to service-recipient/s / GTA. And if yes, purely as an additional defense, one can argue that no services were provided by XYZ and hence, question of service tax does not arise.

This is purely a risk-mitigation suggestion, so as cover a scenario of lacuna/s (if any) in proving availability of exemption (as 'burden to prove availability of exemption lies with person claiming the same').

W.r.t. potential factual aspects of pointed by Shri Kasturi Sethi Ji in above post, even the legal position that 'burden to prove availability of exemption lies with person claiming the same' will be seriously tested in court in these type of one-sided / without prior investigation SCNs.

All above should be treated as strictly personal views of mine only and not a professional advice / suggestion.

[KASTURI SETHI]

Sh.Amit Agrawal Ji,

Awesome indeed ! This is exactly what was brewing in my mind. You are pro-active. I agree with you entirely. The burden of proof is cast upon the person who claims exemption. There is a plethora of judgements to this effect.

SCN is not issued blindly by the department. There must be some basis.

[Amit Agrawal]

I didnot intent to offend anyone!

I was referring to 'Indiscreet Show-Cause Notices (SCNs) issued by Service Tax Authorities' which is even acknowledged by CBIC in its instructions dated 26.10.2021.

If any SCN was so indiscretly got issued, I believe that the legal position that 'burden to prove availability of exemption lies with person claiming the same' will be tested in court/s in a limited sense that 'to what extent / level' this 'burden to prove' will still lie with the noticee' when SCN got issued without affording prioropportunity to explain differences between ITR / TDS with service tax records.

Of-course, this will be decided on the case-to-case basis by looking into account what noticee submits in totallity while defending exemption claimed.

Noticee should try their very best to submit solid supporting evidences - as much they can - to back exemption so claimed, while replying to such SCN. This will help them not only before original adjudicating authiority but also (& if needed) before appellate authority & court.

All above should be treated as strictly personal views of mine only and not a professional advice / suggestion.

[Ganeshan Kalyani]

Sri Amit Sir, your drafting skill is appreciated.

[KASTURI SETHI]

Sh.Amit Agrawal Ji,

Sir, I fully agree with your views at serial no.12. You have outpoured on merits impartially and un-prejudicedly without offending anyone. Your views are always in th interest of fair justice for assessees.

[Amit Agrawal]

I thank Sh. Ganeshan Kalyani and Sh. Kasturi Sethi Ji for kind words!

[Amit Agrawal]

Burden to prove 'taxability' lies with Department & not with noticee. And suggested additional defense in my earlier post No. 3 should be looked into, in that context.

[KASTURI SETHI]

Yes, Sir. You are absolutely right. Burden of regarding taxability is cast on the department and burden of proof regarding claiming exemption is on the person who claims exemption. The present case revolves around classification of service. It is a classification dispute. Hence burden of proof is cast on the department. Here is the judgement of Supreme Court on the issue of classification.

2006 (4) TMI 1 - SUPREME COURT H.P.L. CHEMICALS LTD.Versus COMMISSIONER OF C. EX., CHANDIGARH

[Kaustubh Karandikar]

Thanks Kasturi ji, Amit ji and Ganeshan ji for your very useful advice.

AI Summary

Service tax exemption for goods transport services may apply; owners must prove recipients were goods transport agencies to avoid tax. The primary issue is whether amounts received by a proprietor for hiring trucks/tempos to an intermediary qualify for exemption under Sr. No. 22 of Notification No. 25/2012 ST when the intermediary is a Goods Transport Agency. The practical defense requires documentary proof that all service recipients were GTAs and that the transactions fit the exempt description; alternatively, examining hiring agreements for transfer of the right to use the vehicles may negate provision of taxable services. The claimant must substantiate the exemption with records when replying to Show Cause Notices.