Liability of service tax on transportation charges

[Shreenivaas Nallur Dharma Rau]

Our company purchased finished goods from various manufacturers after payment of appropriate excise duty. We have directed the manufacturers to despatch the goods to our various depots. They supplied the goods in their own trucks and in some cases they have hired the local trucks for which we have paid the transportation charges extra as per agreement. Now the Excise dept. is demending Service tax from us for the payment of such transportation charges paid to the manufacturers. Our contention is they are the manufacturers and not covered under GTA and hence service tax is not liable for such transportation charges. Your valued opinion with caselaws if any to justify our case is solicited. Thanks & Regards, B.C.Bhat

[Dinesh Gupta]

The question is whethe the supplier / manufacturer of finished goods has acted as independent transaporter and collected fare from your commpany. Or he has supplied the goods as owner of truck and transportation charges collected seperately. In the first instance there would not be any service tax whereas on the second instance there would be service tax on GTA service. After ascertaining the fist issue, you need to ascertain that who is liable to pay service tax.

AI Summary

Service tax on transportation charges turns on whether the supplier acted as an independent transporter or mere vendor. Liability for service tax hinges on whether the manufacturer acted as an independent transporter or merely supplied goods with incidental carriage; where carriage is a distinct transport service (including Goods Transport Agency services) and freight is separately charged and collected by the supplier, the transportation component may attract service tax, and the liable person must be identified by examining contractual terms and invoicing.