Cestat on Service Tax demand under Goods Transport Agency

Service Tax - Goods Transport Agency Service - Pre-deposit: Prima-facie, the appellants have only reimbursed the freight expenses incurred by the suppliers and since the appellants' contracts that the suppliers were on F.O.R basis, it is the suppliers who had engaged the transporters to arrange the transportation of the goods from Nepal upto the appellant's factory premises and it is the supplier who have made payment to the transporters. Therefore, prima-facie, the appellants cannot be treated as recipient of GTA service. Pre-deposit of demand, interest and penalty is waived for hearing of these appeals and recovery thereof is stayed. The stay petitions are allowed. (para 3)

[Per: Rakesh Kumar] - The appellants in this group of appeals are manufacturers of Grey Fabrics. All of them purchased yarn from the manufacturers in Nepal. The yarn was supplied to the appellants by the Nepalese manufacturers on F.O.R. basis and accordingly, the arrangement of transportation of the yarn from Nepal to the appellants premises was made to the suppliers and it is the suppliers who paid freight to the transporters. The invoices of the suppliers are in two parts - first invoice gives the basic price of the goods and the second invoice contains statement of expenses incurred on transportation, handling, customs duty etc. The Department was of the view that the appellants who reimbursed freight charges to the suppliers are receiver of GTA service and accordingly they would be liable to pay service tax on the transportation charges. It is on this basis that the show cause notices were issued to the appellants for recovery of service tax on GTA along with interest and also imposition of penalty on them for non-payment of service tax. The service tax demands were confirmed by the Asstt. Commissioner and on appeal, the Asstt. Commissioner's orders were upheld by the Commissioner(Appeals). It is against these orders of the Commissioner (Appeals) that the present appeals have been filed alongwith the stay applications.

2. Heard both the sides.

2.1 Shri Bipin Garg, Advocate, learned Counsel for appellant pleaded that the appellants are not the receivers of the GTA service; that the appellants contract with the Nepalese suppliers are on F.O.R basis and it is the Nepalese suppliers who had engaged the transporters for transportation of goods upto the appellants premises, that the appellants have only reimbursed expenses incurred by the suppliers, that by this, the appellant do not become the recipient of the GTA service; that it is only the suppliers in Nepal who are the recipient of GTA service and that in view of this, the service tax demand against the Appellants are not sustainable. He, therefore, pleaded that the appellants have a strong prima-facie case and hence the requirement of pre-deposit of service tax demand, interest penalty may be waived for hearing of these appeals.

2.2. Shri S. K. Bhaskar, learned DR, defended the impugned orders and pleaded that the suppliers who engaged the transporters, have to be treated as agent of the appellants and hence the appellants have to be treated as recipient of the GTA service and being recipient, the appellant will be liable to pay service tax. He, therefore, pleaded that this is not a case for waiver from the requirement of pre-deposit of service tax demand, interest and penalty.

3. I have carefully considered the submissions from both the sides and perused the records. Prima-facie, I find that the appellants have only reimbursed the freight expenses incurred by the suppliers and since the appellants' contracts that the suppliers were on F.O.R basis, it is the suppliers who had engaged the transporters to arrange the transportation of the goods from Nepal upto the appellant's factory premises and it is the supplier who have made payment to the transporters. Therefore, prima-facie, I am of the view that the appellants cannot be treated as recipient of GTA service. In view of this, the requirement of pre-deposit of demand, interest and penalty is waived for hearing of these appeals and recovery thereof is stayed. The stay petitions are allowed.

Order dictated in the open Court.