GTA Service Undertaken for Carriage of Food Grains and Pulses are Exempted by Notification: CESTAT Remand Matter for Re Compute Service Tax Payable

In a recent judgement, the Chennai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) remanded matter for re compute service tax payable under Good Transport Agency Service (GTA) Service, as the service undertaken for carriage of food grains and pulses are exempted by notification.

The Rasipuram Agricultural Producers Co-op. Marketing Society Ltd. (the Appellant) was established in 1929 to provide service for the benefit of the agriculturists who are members of the society.  As an agent of the members, to ensure that the agriculturists get a fair price for their products, appellants are providing marketing assistance such as in the nature of secret tender service and marketing the agricultural produce on behalf of the members.

It was alleged by the Department that the services rendered by the appellants are in the nature of the "Auctioneer's Service", "Business Support Service" and "Good Transport Agency Service".  As such, a Statement of Demand No. 8/2013 dated 05.04.2013 was issued demanding Service Tax of Rs.5,31,325/- for the period from 01.10.2011 to 30.06.2012 under Section 73(1) of the Finance Act, 1994, besides demand of interest and imposing penalties under Section 76, 77 and 78 of the Finance Act, 1994.

The appellant submitted a detailed reply to the Adjudicating Authority and additional submissions at the time of personal hearing.  On adjudication, the Original Adjudicating Authority confirmed the proposals made in the Statement of Demand notice. 

The demand on GTA Service was confirmed due to the fact that the appellants have undertaken the work of lifting and delivering the goods to ration shops under Public Distribution System and that the appellant have not produced any material evidence to claim exemption under Notification No. 04/2010-ST dated 27.02.2010.

The appellants have undertaken the work of lifting the Ration goods (like wheat, rice, pulses, sugar etc.) from the Tamil Nadu Civil Supplies Corporation godowns to various Ration shops located within the approved jurisdiction.  For the above purpose, they have engaged individual truck owners or truck operators such as lorry owners/ transporters and not goods transport agency.

The counsel has submitted that only goods transport agency is liable to pay tax as per the statutory definition of "Goods Transport Agency Service" and Ministry's clarification if any, the liability to pay tax can be fastened on consignor or consignee, as the case may be, as per Section 68(2) Finance Act, 1994 read with Service Tax Rule 2(1)(d)(v).  The transport charges have been paid by the appellants towards the lifting of ration goods which was transported by Truck operators. GTA Service is not a levy on lorry owners or truck operators.  The truck owners or truck operators are not liable to pay the tax and are not covered under the levy is confirmed by the Tribunal’s decision in the case of Lakshmi Narayana Mining Co. Vs. Commissioner of Service Tax, which has been affirmed by the Karnataka High Court.

The counsel has further argued that even if impugned service is taxable under the category "Goods Transport Agency Service", the demand is not sustainable as the same has been demanded without providing the benefit of abatement to the extent of 75% under Notification No. 1/2006-ST dated 01.03.2006. The Authority has alleged that the appellants have not produced evidence to claim exemption. It is submitted that the only requirement for claiming exemption under Notification No. 1/2006 is that the assessee should produce declaration from the transporter that they have not availed credit on the Service Tax paid.

It was argued that the transport of food grains/ pulses by road has been exempted under Notification No. 33/2004-ST dated 03.12.2004 and that they are eligible for exemption under Notification No. 34/2004-ST, since they had incurred some short distance loads for which they have paid freight of Rs.750/-. Thus, the demand has to be re-worked, if Service Tax is liable to be paid under Goods Transport Service. 

The  Tribunal observed that the Appellant has sought (i) the benefit of 75% abatement under Notification No. 32/2004-ST dated 03.12.2004 where the transporter has to certify as to non-availment of CENVAT benefit (ii) the benefit of Notification No. 34/2004-ST dated 03.12.2004 where freight paid on individual consignment upto Rs.750/- and multi-consignment freight upto Rs.1500/- get exempted from payment of tax and (iii) exemption for transport of food grains and pulses w.e.f. 29.02.2010 under Notification No. 33/2004-ST dated 03.12.2004.  The period of dispute involved in this case is 01.10.2011 to 30.06.2012.  As such, it is required to re-compute the GTA Service Tax payable by the Appellant after extending the benefit of the Notification No. 32/2004-ST and Notification No. 34/2004-ST and also for carriage of food grains and pulses under Notification No. 33/2004-ST dated 03.12.2004 subject to fulfillment of conditions by the Appellant considering the facts obtaining in the appeal.

A two member bench of Mr P Dinesha, Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical) directed the Lower Adjudicating Authority to re-compute the tax payable giving the benefit of abatement under Notification No. 32/2004-ST dated 03.12.2004 and exemption benefit under Notification No. 34/2004-ST dated 03.12.2004.  GTA Service undertaken for carriage of food grains and pulses is also exempted from payment of Service Tax w.e.f. 29.02.2010 under Notification No. 33/2004-ST dated 03.12.2004

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