CESTAT Quashes Service Tax Demand on supply of chassis under GTA service on ground of Wrongful Inclusion of Service Category under ‘Supply Tangible Goods Service’ [Read Order]

The Allahabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand on the supply of chassis under the Goods Transport Agent (GTA) service on the ground of wrongful inclusion of service category under the supply of tangible goods service. 

Pranish Carriers LLP, the appellant assessee was engaged in providing the services of Goods Transport Agency (GTA) on which the due service tax was paid by the recipient of the service i.e.INOX Air Products Ltd. [INOX] and the assessee was providing the Lorry Chassis to INOX on which specialized tanks/equipment for carriage of gas was mounted by INOX and these carriers with the mounted items were used for transportation of the gases. 

The assessee appealed against the order passed by the Commissioner of Central Excise & Service Tax (Audit) for confirming the demand of Service Tax amounting to 4, 34,12,380/- (inclusive of Education Cess & S.&H. Education Cess) upon the party under proviso to Section 73(1) of the Finance Act 1994 and for the imposition of penalties. 

Gopal Mundhra, the counsel for the assessee contended that the agreement was in respect of providing the chassis owned by the assessee to Inox on hire charges which included fixed and variable charges as per travelled distance and there was not transfer of effective control and possession of the goods. 

Sandeep Pandey, the counsel for the department relied on the decisions made by the lower authorities and contended that the service rendered by the assessee falls under the category of supply of tangible goods services and is liable to be sustained. 

The Bench observed that in the case of M/s. Ultratech Cement Limited, the court held that the assessee in that case is rendering GTA service by transportation from one place to another as per the direction of the service recipient. Therefore, the same was not classifiable under the supply of Tangible Goods for use service. 

The two-member bench comprising P K Choudhary (Judicial) and Sanjiv Srivastava (Technical) held that the demand made in the present case after noting the payment of tax as the hand of the service recipient the same transaction goes contrary to Article 265 of the Indian Constitution and hence cannot be sustained. 

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