The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that services rendered to construction of roads were not exigible to service tax quashed the service tax demand under Reverse Charge Mechanism (RCM) on roads transport agency services on individual truck owners services.
The appellant/assessee, M/s Aaditya Constructions1 is a partnership firm engaged in providing construction services in respect of commercial or industrial buildings, civil structures and works contracts and was a recipient of “transportation of goods by road” services. It had registered with the service tax department and had been filing service tax returns.
After reviewing the appellant’s audit reports, the department discovered that the amounts listed in the ST-3 returns as payments received for taxable services did not match the receipts on the balance sheets. As a result, the appellant was sent summonses on July 29, 2013, and September 2, 2013, requesting reconciliation statements and other documents, which it provided in a letter dated September 19, 2013, along with copies of work orders.
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The appellant claimed in these documents that the amounts it had not paid service tax on were related to the provision of exempted services. The agency issued a summons on October 4, 2013, requesting additional documents, but the appellant failed to produce them. The SCN was given after the department determined that the appellant had failed to pay service tax on some services after re-comparing the ST-3 with the balance accounts for the 2008–09 to 2011–12 period.
Counsel for the appellant submitted that the show cause notice failed to classify the services and it was not clear whether the demand was being made under the construction of complex services or under the works contract services. It is his submission that the contracts which it had received were for providing services along with the use of materials. Therefore, they were in the nature of work contract services.
The appelant had received transportation of services from individual truck owners and not from goods transport agencies and, therefore, no service tax was payable on them. The appellant also received some transportation services from goods transport agencies on which it had paid an amount of Rs. 3,30,671/- along with its VCES application 2013. The amount has paid stands appropriated.
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Of the six heads under which amounts were received by the appellant for providing services, the appellant already paid service tax in respect of “construction of boundary walls and area grading” and settled regarding two disputed services, namely, supply of machinery, boulders and dust and supply of aggregates under the VCES scheme. The appellant submits that it had also settled dispute regarding the demand of service tax under reversed charged mechanism under GTA services received by it under the VCES scheme.
As far as the demand of service under reverse charge mechanism on GTA service is concerned, section 65 (50a) defines goods transport agency as any person who provides service in relation to transportation of goods by road and issues a consignment note, by whatever name called. Section 65 (105)(zzq) defines “goods transport agency service” as a service provided to any person by “goods transport agency” in relation to transport of goods by road in a goods carriage. Unless the service provider is a “goods transport agency”, its services are not taxable either at the hands of the service provider or at the hand of service recipient because such services are out of the purview of the charging section.
The appellant submitted that to the extent the appellant had received amount through goods transport agencies it has already paid service tax as a part of settlement under VCES 2013. As far as the individual truck owners are concerned, the services rendered by the appellant are not exigible to service tax because they are not goods transport agency.
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The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has held that demand of service tax under reverse charge mechanism on roads transport agency services on the services rendered by the individual truck owners also cannot be sustained. Since the demand of service tax cannot be sustained, the demand of interest and penalty also need to be set aside.
In view of above, the appeal is allowed and the impugned order is set aside with consequential relief to the appellant, if any. It is a well settled legal position that individual truck owners who do not issue consignment notes are not covered by the definition of goods transport agency and the services rendered by them are not exigible to service tax.
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