Customs Tribunal Quashes Service Tax Demand on Indian Tobacco Traders for GTA Services

Service Tax Exemption Upheld for Transportation Services Without Consignment Notes

In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Regional Bench at Hyderabad has set aside the service tax demands levied on Indian Tobacco Traders by the Commissioner of Central Tax, Guntur. The tribunal ruled that the transportation of goods by individual truck owners without the issuance of consignment notes falls under the Negative List of services as per Section 66D of the Finance Act, 1994, and is thus exempt from service tax under the Goods Transport Agency (GTA) category.

The case involved three appeals filed by Indian Tobacco Traders related to different periods between July 2012 and March 2017, with disputed service tax amounts totaling Rs. 3,98,164. The appellants engaged individual truck owners for the transportation of tobacco leaves without the issuance of consignment notes, arguing that such services are exempt from service tax under the Negative List provisions.

The Tribunal, comprising Mr. A.K. Jyotishi and Mr. Angad Prasad, sided with the appellants, reinforcing the principle that a consignment note is a prerequisite for service tax liability under GTA. The absence of such documentation exempts the service from the taxable category. The judgment relied heavily on precedents from various CESTAT benches and the Hon'ble Supreme Court, which have consistently held that service tax cannot be levied in the absence of a consignment note.

The department's argument that consignment notes could take any form, including chits or slips, was dismissed by the Tribunal. It emphasized that a consignment note must contain specific details as mandated by law, such as the name of the consignor and consignee, registration number of the goods carriage, and other transport details, which were absent in this case.

This ruling not only provides relief to Indian Tobacco Traders but also reaffirms the legal position for other businesses engaging in similar transportation arrangements. The decision underscores the importance of adhering to statutory requirements for consignment notes to determine tax liabilities under the GTA provisions.

Bottom Line:

Service Tax under Goods Transport Agency (GTA) cannot be recovered when consignment notes are not issued by the service provider, as it is excluded under the Negative List as per Section 66D of the Finance Act, 1994.

Statutory provision(s): Finance Act, 1994 Section 66D, Rule 4B of Service Tax Rules, 1994

Indian Tobacco Traders v. Commissioner of Central Tax Guntur, (CESTAT)(Regional Bench - Hyderabad) : Law Finder Doc Id # 2815867