Service Tax Demand of ₹26.26 Lakh Quashed: CESTAT Confirms Exemption for Own-Truck Operations [Read Order]

In a recent ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad, set aside a ₹26.26 lakh service tax demand and held that transportation carried out through the firm’s own trucks without issuance of consignment notes was exempt from service tax under the negative list provisions of the Finance Act, 1994.

The dispute arose after the department alleged that the Kanpur-based transporter had received ₹6.08 crore during FY 2015–16 and failed to pay service tax. A show-cause notice issued in December 2020 demanded ₹88.16 lakh, invoking the extended limitation period. The company contended that the notice was never served and that its operations were exempt since it used its own fleet of 31 trucks and did not issue consignment notes—an essential condition for classification as a Goods Transport Agency (GTA).

The appellant, Ganpati Transport, further argued that where consignment notes were issued, the tax liability shifted to the consignor or consignee under the Reverse Charge Mechanism (RCM), as per Notification No.30/2012-ST. The tribunal agreed, noting that sample goods receipts produced by the appellant clearly stated “Service Tax Paid by Consignor/Consignee.”

On the other revenue justified the impugned order and prayed that the appeal filed by the Appellant, being devoid of any merits, may be dismissed.

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The bench comprising P.K.Choudhary (Judicial Member)and P. Anjani Kumar (Technical Member) observed that the tax department’s demand was based solely on third-party data obtained from the Income Tax Department, without examining the transporter’s own records. The tribunal noted that such presumptive assessments, unsupported by evidence of fraud or suppression, could not sustain.

The bench also found that the demand was time-barred, as the show cause notice dated 23 December 2020 sought tax for a period extending back to April 2015 beyond the permissible five-year limit. It added that the absence of mandatory pre-show cause consultation, required for demands exceeding ₹50 lakh, further weakened the department’s case.

Citing precedents including Sharma Fabricators & Erectors Pvt. Ltd. and Pushpam Pharmaceuticals Co., the tribunal stated that demands based solely on income tax data without verification of service tax records were unsustainable.

the tribunal quashed the ₹26.26 lakh demand, along with interest and penalties, and upheld the exemption for own-truck operations, reaffirming that mere transportation by truck owners without consignment notes does not constitute taxable GTA service.

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Accordingly the impugned order was set aside and The appeal filed by the Appellant was allowed with consequential relief, as per law.

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