The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside the Demand of Service Tax in absence of evidence to prove service of GTA (Goods Transport Agency Service) to National Thermal Power Corporation (NTPC).
M/s Power Machines India Ltd, the appellant challenged the order-in-original dated 09.01.2014 passed by the Commissioner (Adjudication), Service Tax, New Delhi, whereby he confirmed the demand of Rs. 1,18,63,098/- as service tax on Goods Transport Agency Service for the period 2007-2008 to 2011-2012 and also imposed penalties on the appellant.
The appellant is a subsidiary of M/s OJSO Power Machines, Russia and is engaged in providing services like Erection and Commissioning of turbine generators, Management Maintenance and Repair Services, Consulting Engineer Services, etc. in relation to power generation plants. It was registered with the service tax department for providing Erection, Commissioning and Installation Services, Management Maintenance and Repair Services with the service tax department. It was also registered as a service recipient under the category “Transport of Goods by Road” Service under section 65 (105) (zzp) of the Finance Act, 19942.
The appellant had supplied the goods and invoiced NTPC @ 2% of the value of the goods towards transportation charges. The appellant hired other transporters to transport the equipment and paid them for the transport. On these goods transport agency services availed by the appellant, it had discharged service tax as a recipient of the service and there is no dispute about it.
Three show cause notices were issued to the appellant for different periods demanding service tax on the 2% transportation charges which it received from NTPC towards the transportation of the goods.
The short question to be decided is if the appellant is liable to pay service tax under the head Goods Transport Agency Service on the 2% amount, which it had collected towards transportation from M/s NTPC. It is evident from the records that the appellant’s contracts were for supply of the goods, and for provision for Erection, Commissioning and Installation and Management Maintenance and Repair Services. In order to erect and install the equipment, they need to be transported to the site by the appellant.
As per the agreement, the appellant could charge 2% of the sale value of the equipment for this transportation. It did not matter what was the actual cost of transportation incurred by the appellant. If it was more, the appellant would have to suffer the loss and if it was less, the appellant could gain. According to the Revenue, this collection of 2% towards transportation amounts to providing Goods Transport Agency Service.
According to the appellant, it was not providing any Goods Transport Agency Service and in fact it had not issued any consignment note, as required under section 65 (50b) according to which Goods Transport Agency means “any person who provides service in relation to transportation of goods by road and issues consignment note, by whatever name called”. Nothing in the records before us show that the appellant was providing Goods Transport Agency Service to M/s NTPC.
The person liable to pay service tax in case of Goods Transport Agency Service is the one who is liable to pay the freight for the transportation of such goods. In other words, it is the NTPC which would have been liable to pay service tax and not the appellant. It also needs to be pointed out that the appellant had hired the services of Goods Transport Agencies for transporting the goods and as the service recipient, it had discharged service tax on the amounts which it paid towards goods transportation.
A two member bench comprising Justice Dilip Gupta , President and Mr P V SubbaRao, Member (Technical) observed that there is nothing to establish that the appellant was providing Goods Transport Agency Service to the NTPC. It was only charging 2% towards the cost of transportation of goods. Even if the appellant had provided the Goods Transport Agency Service, it is the NTPC which would have been liable to pay service tax on such services and not the appellant.
The appeal is allowed and the impugned order is set aside with consequential relief to the appellant.
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