No Consignment Note, No GTA Tax: CESTAT Sets Aside Service Tax Demands on Indian Tobacco Traders [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal, Hyderabad (CESTAT), set aside Service Tax which cannot be levied under Goods Transport Agency (GTA) in the absence of a consignment note, therefore set aside the demands raised for the relevant periods.

Indian Tobacco Traders, the appellant, procured tobacco leaves from auction yards of the Tobacco Board and arranged for processing through a third-party processor before marketing the redried and threshed products locally and through export. For transporting tobacco leaves and processed products, the appellant directly engaged individual truck owners and operators, who only collected transport charges without issuing any consignment notes.

The Department issued three Show Cause Notices demanding Service Tax on the premise that the activities constituted taxable services under the GTA as per the Finance Act, 1994. The Adjudicating Authority confirmed the demands, interest, and penalties, and the Commissioner (Appeals) upheld these orders, leading to the present appeals before the Tribunal.

Counsel S. Sankaravadivelu, appearing for the appellant, argued that transportation services rendered by individual truck owners without issuance of consignment notes fall within the Negative List under Section 66D of the Finance Act, 1994, and therefore are exempt from Service Tax. He submitted that “GTA” under Section 65B(26) of the Finance Act, 1994 requires the issuance of a consignment note, which was never issued in this case.

Further contended that the Department incorrectly rejected their claim that the processed tobacco qualified as “agricultural produce” eligible for exemption under Notification No. 25/2012-Service Tax. The Appellant placed multiple precedents on record, including Tribunal decision in Chartered Logistics Ltd. (2024), holding that in the absence of a consignment note, no liability arises under GTA services.

Representative A. Rangadham, appearing for the Department, contended that the liability under GTA could arise even without a formal consignment note, provided the factual elements of transportation by road were fulfilled.

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The Bench comprising Judicial Member Angad Prasad and Technical Member A.K.Jyotishi held that the issuance of a consignment note is a mandatory statutory requirement under Rule 4B of the Service Tax Rules, 1994, and that GTA services can arise only when such a document, containing specified particulars, is issued by the transporter.

The Tribunal noted that the Department failed to produce any document that could qualify as a consignment note under the statutory definition. It rejected the Department’s contention that slips or informal papers could substitute for a consignment note, observing that while contracts may be oral, a consignment note cannot be.

The Bench reiterated that without a consignment note, there is no GTA service and therefore no taxable service. Accordingly, the demands of Service Tax, interest, and penalties were set aside, and all three appeals were allowed with consequential relief.

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