No Service Tax on Freight & Cartage Expenses under GTA Services: CESTAT [Read Order]

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that freight and cartage costs under GTA (Good Transport Agency) services are exempt from service tax liability.

The two member bench of Rachna Gupta (Judicial) and Hemambika R. Priya (Technical) has stated that the said amount/expenses/charges were not paid by the assessee directly to the transporter for transportation of any goods. Thus, the said activity cannot be covered under GTA Services, hence, no service tax liability can be levied on the aforesaid amount/expenses/charges under GTA services.

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The respondent/assessee, Globe Civil Projects Pvt. Ltd., is registered to offer works contract services, complex construction services, and commercial or industrial construction services.  The assessee was accused of failing to pay the required service tax on taxable services related to civil structure, works contracts, and the construction of commercial or industrial buildings.

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The assessee received a show-cause notice requesting payment of the service tax, interest, and penalties.  With the exception of the service tax demand for "Good Transport Agency Service," the Adjudicating Authority has set aside the majority of the aforementioned demand.

Before the Tribunal, the appellant/department has contested the Adjudicating Authority's ruling.  Due to the unsustainable demand for service tax under three distinct service categories for a single operation, the assessee argued that the SCN is ambiguous.  The assessee further argued that the construction services rendered to IIM, DDA, and CEAI were not for commercial purposes and, as a result, could not be categorized under the headings of Works Contract Service, Commercial or Industrial Construction Service, or Construction of Complex Service.

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In contrast, the government said that the assessee received secured advances and customer advances for the execution of construction operations under Current Liabilities, which were taxable amounts for which the assessee did not pay any taxes.  Additionally, they paid freight expenses under the Goods Transport Agency's freight and carriage expenses category, but they failed to pay the tax.

The Tribunal noted that the structures that were built were not principally used for business or industry, and that the services for the construction of IIM, DDA, and CEAI were provided for a non-profit organization.  As a result, neither "Commercial or Industrial Construction Service" nor "Works Contract Service" apply to these services.

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The Tribunal noted that the costs of cartage, transportation, pumping, insurance, auto coverage, site fees, and freight were all included in the freight and cartage expenses.  'Cartage' refers to the sum paid to the items' provider, which includes the cost of transportation.

The bench found that the respondent was maintaining all the records and reflecting the same is the books of account as also in the balance-sheet in the present case.  The demand was proposed basis the records of the respondent’s data shown in the balance sheet.  Thus, suppression cannot be alleged.  

It was viewed that “transportation and pumping charges are in respect of pumping of ready-mix concrete (RMC) material for construction activity.  The aforesaid expenses also include expenses towards insurance and car policy and site expenses (payment made to cab supplier).  The said amount/expenses/charges were not paid by the respondent directly to the transporter for transportation of any goods.  Thus, the said activity cannot be covered under GTA Services, hence, no service tax liability can be levied on the aforesaid amount/expenses/charges under GTA “services.  

While dismissing the appeal, the bench uphold the order under challenge. 

To Read the full text of the Order CLICK HERE

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