CESTAT holds Hindustan Unilever Ltd eligible to avail 75% of abatement on freight paid to GTA [Read Order]

In a recent case, the Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that Hindustan Unilever Ltd is  eligible to avail 75% of abatement on freight paid to GTA .  It was  observed that the appellant had availed the abatement during the period from February 2005 to February 2006 while the Show Cause Notice was issued on 30.03.2010, which is beyond the normal period of limitation.

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M/s. Hindustan Unilever Limited, the appellant is in appeal against the impugned order wherein the demand of Service Tax has been confirmed by denying the benefit of abatement provided under Notification No. 32/2004-S.T. dated

03.12.2004.

The appellant are engaged in the manufacture of Soaps, OSAA and Glycerine falling under Chapters 34, 15 and 38 respectively, for manufacture of which the appellant have their factory inter-alia at 63, Garden Reach Road, Kolkata - 700 024. The appellant avails CENVAT Credit on inputs, capital goods used in the manufacture of the final products. The appellant avails of the services of

Goods Transport Agency (GTA) for inward/outward transportation of the materials/goods. In all such cases, the appellant pays Service Tax under reverse charge mechanism in terms of Section 68(2) read with Rule 2(1)(d)(v) of the Service Tax Rules, 1994 read with Notification No. 35/2004-S.T. dated 03.12.2004.

Notification No.32/2004-S.T. dated 03.12.2004 and Notification No.01/2006-S.T. dated 01.03.2006 exempt 'taxable service provided by the GTA' equivalent to 75% of the gross amount from levy of service tax. Therefore, the appellants has paid Service Tax on 25% of the freight paid to GTA.

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A Show Cause Notice dated 30.03.2010 was issued to the appellant proposing to demand differential Service Tax of

Rs.56,18,028/- for the period from February, 2005 to February 2006, denying the abatement of 75% based on the allegation that appellant has not satisfied the conditions provided in the Notification No.32/2004-S.T. dated 03.12.2004.

The matter was adjudicated and the demand of Service Tax, along with interest, was confirmed vide the impugned order wherein the benefit of abatement provided under Notification No. 32/2004-S.T. dated 03.12.2004 was denied to the appellant. The Ld. Commissioner also imposed a penalty equal to the amount of tax demanded under Section 78 of the Finance Act, 1994.

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The short issue involved in the matter is as to whether 75% abatement of freight paid to GTA under Notification No.32/2004-S.T. dated 03.12.2004 is available only to the GTA or to the appellant which has discharged the Service Tax under reverse charge mechanism under Rule 2(1)(d)(v) of the Service Tax Rules, 1994.

Further, M.F.(D.R.) Letter F. No. B1/6/2005-TRU dated 27.07.2005 has clarified that “An abatement of 75% in taxable service of goods transport by road is available on the condition that the goods transport agency has not availed credit on inputs and capital goods used for providing taxable service and has also not availed benefit of notification No. 12/2003-Service Tax, dated 20-62003 (vide Notification No. 32/2004-Service Tax, dated 3-12-2004). It has been requested that in cases where liability for tax payment is on the consignor or con-signee, the procedure as to how it should be confirmed by such consignor or consignee that the goods transport agency has not availed credit or benefit of notification No. 12/2003Service Tax may be prescribed. In such cases it is clarified that a declaration by the goods transport agency in the consignment note issued, to the effect that neither credit on inputs or capital goods used for provision of service has been taken nor the benefit of notification No. 12/2003-Service Tax has been taken by them may suffice for the purpose of availment of abatement by the person liable to pay service tax.”

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A two member bench of Shri Ashok Jindal, Member (Judicial) and Shri K. Anpazhakan, Member (Technical) held that the appellant is entitled to 75% of abatement on freight paid to GTA under Notification No. 32/2004-S.T. dated

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03.12.2004. The Tribunal further observed that the appellant had availed the abatement during the period from February 2005 to February 2006 while the Show Cause Notice was issued on 30.03.2010, which is beyond the normal period of limitation.  There is also no evidence on record to indicate suppression of facts on the part of the appellant. In these circumstances, whole of the demand is barred by limitation. Thus, on the ground of limitation also, the impugned demand is not sustainable.

To Read the full text of the Order CLICK HERE

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