Consignment Note Mandatory for GTA Classification under Service Tax: CESTAT [Read Order]

The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal ( CESTAT ) held that issuance of a consignment note is mandatory for classifying a service provider as a goods transport agency (GTA) under service tax law.

Associated Soapstone Distributing Company Pvt. Ltd,appellant-assessee,had provided mining services to Gujarat Mineral Development Corporation (GMDC) under an agreement dated August 17, 2010. It was registered for service tax and had been paying tax on these services.

As part of its contract, it transported limestone and lignite to Akrimota Thermal Power Station and brought back ash to the mines. For this, it hired R.K. Carriers India Pvt. Ltd. and paid them on a per-tonne basis. RK Carriers raised monthly bills, and payments were made after deductions.

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A show cause notice dated April 13, 2017, was issued for the period April 2015 to March 2016, demanding service tax under reverse charge on the transport services received from RK Carriers. Interest and penalty under Sections 75 and 76 of the Finance Act, 1994, were also proposed.

The Additional Commissioner confirmed a demand of ₹54.38 lakh along with interest and imposed a penalty of ₹5 lakh. The Commissioner (Appeals) later upheld this order.

The assessee counsel argued that since RK Carriers did not issue any consignment notes, it could not be treated as a GTA. Without consignment notes, the services provided did not qualify as GTA services, and therefore, the appellant was not liable to pay service tax under reverse charge for the period after July 1, 2012.

It was also submitted that the payment for transporting ash was less than ₹1,500 per truck, which was exempt from service tax. Additionally, if the demand was upheld, the benefit of cum-tax should be allowed, and the penalty under Section 76 was not justified.

The departmental representative supported the impugned order.

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The two member bench comprising Dr.Rachna Gupta(Judicial Member) and P.V.Subba Rao(Technical Member) reviewed the submissions and records and noted that a consignment note was essential for a service to qualify as a GTA service. The show cause notice claimed that the appellant received GTA services, but no evidence was provided to show that RK Carriers had issued any consignment notes.

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The appellate tribunal observed that neither the original order nor the appellate order addressed this issue. It noted that the agreement with RK Carriers only required submission of monthly bills, not consignment notes. The assessee counsel also confirmed that no consignment notes were issued.

Since there was nothing on record to show that RK Carriers acted as a GTA, the tribunal held that the reverse charge did not apply. As a result, the demand for service tax, interest, and penalty was not justified.

The CESTAT set aside the impugned order and allowed the appeal.

To Read the full text of the Order CLICK HERE

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