United Steel Agencies v. Commissioner Of Central Excise & St .

Madhu Mohan Damodhar, Member (Technical):— The facts of the case are that proceedings had been initiated against the appellants for alleged non-payment of service tax liability of Rs. 1,23,851/- with interest thereon in respect of freight charges paid by them. The SCN dt. 14.11.2008 alleged that appellants are required to discharge service tax liability in respect of services from GTA as they were a partnership firm. Original authority confirmed the demand as proposed in the SCN vide order dt. 31.03.2011 which was upheld by the Commissioner (Appeals) in an order dt. 23.08.2012 (impugned order).

2. Today when the matter came up for hearing, on behalf of the appellant, Ld. Consultant Shri R. Balagopal submits that the proceedings have been initiated on the premise that appellants were a partnership concern, which is not correct. Ld. Consultant submits that appellant is only a proprietary concern proof of which had been submitted to the Commissioner (Appeals) which have been noted in para-8 of the impugned order. However, Commissioner (Appeals) has not taken cognizance of the proof adduced by them on the ground that they have not been filed during the initial proceedings. He submits that identical issue has been addressed by the Tribunal in Andal Motors v. CCE Salem - 2018 (10) G.S.T.L. 369 (Tri.-Chennai) in favour of the appellant thereof. Ld. Consultant also submits that even the registration certificate was issued to them only as a proprietary concern.

3. On the other hand, Ld. A.R. Shri A. Cletus supports the impugned order.

4. After hearing the submissions, we find merit in the submission of the Ld. Consultant. While there is an allegation that appellants are a partnership firm no cognizance has been accorded to the proof adduced by them. Ld. Consultant has also submitted that even the registration certificate has been issued to the assessee as a proprietary concern.

5. Viewed in this light, we find that appellant is not required to discharge tax liability under GTA. We also find resonance in our conclusion from the Tribunal's decision in Andal Motors (supra). The relevant portion of the order is reproduced below:

“4.2 For better understanding of the issue at hand, it would be useful to reproduce the provisions of Rule 2(1)(d)(v) of Service Tax Rules, 1994 as under:

“(v) in relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is,—

(a) Any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(b) Any company established by or under the Companies Act, 1956 (1 of 1956);

(c) Any corporation established by or under any law;

(d) Any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any Part of India;

(e) Any co-operative society established by or under any law;

(f) Any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder; or

(g) Any body corporate established, or a partnership firm registered, by or under any law,

Any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage;”;

4.3 From a perusal of the SCN dated 24-7-2006, it is seen that in para 3.1, it is alleged that appellant is a “Proprietary limited company” and also registered as “corporate” under Sales Tax for trading of goods, and as such they are liable for payment of service tax on the freight element. Intriguingly, however, in the adjudication order by original authority dated 17-4-2007, this allegation has not been addressed at all and the tax liability proposed in the notice is confirmed (para 25) only on the grounds that “assessee in a statement deposed before Superintendent, Hqrs. Prev. Unit, Salem Commissionerate admitted to their having incurred freight charges for inward transportation and that due to their ignorance of service tax liability and also service tax provisions, they had not paid service tax on the freight charges paid during the material period. I also find that the service provider obtained service tax registration subsequently and paid appropriate service tax along with relevant interest. This goes to confirm their liability for payment of service tax”.

4.4 Thus, just because the proprietor of a proprietaryship concern, whose level of education and degree of legal knowledge does not appear to be very high, on being interrogated by the officers makes an admission that he is liable to pay service tax liability, that would not be a justification for confirmation of tax liability especially without any legal basis thereat. Even the lower appellate authority while considering the appeal against this order has not gone into this aspect at all.

4.5 Be that as it may be, it would be necessary to go through the relevant provisions reproduced at para 4.2 above. On going through those provisions, it is seen that if the consignee to be liable to pay freight, it has to be a factory registered under Factories Act, or any company established under Companies Act, or any corporation established by or under any law or any society registered under the Societies Registration Act etc. or any cooperative society established by or under any law or any dealer of excisable goods who is registered under the Central Excise Act, 1944 or the Rules made therein or any body corporate established or a partnership firm registered by or under any law. Being a proprietary concern, we of the opinion that appellant as a consignee of GTA services will not fall under the category of “corporation, society or cooperative society”. They are also not partnership firm or body corporate established by or under any law. The argument that appellant is registered under Central Sales Tax Act and Tamil Nadu General Sales Tax Act will not make them a body corporate since those registrations are only for the purpose of discharge of tax liability on sales effected and are required to be taken by all persons who have taxable turnover under those laws. In any case, the registration under CST/TNVAT have been issued only to proprietor “M. Mani, M/s. Andal Motors”. Department has sought to assign the appellant as “Proprietary Limited Company”, an entity which, in our opinion, does not exist. It is also not forthcoming from the facts on record that appellants are a dealer of excisable goods registered under the Central Excise provisions.

4.6 Viewed in this light, we find merit in the appellant's main plea that there can be no tax liability at all on them since they will not be covered under Rule 2(1)(d)(v) of Service Tax Rules, 1994 or either in any of the guidelines listed therein in the capacity of a consignee of goods by Piaggio Vehicles (P) Ltd”.

In the light of the discussions herein above, and also following the ratio of Andal Motors (supra), the impugned order to the contrary then cannot sustain and will require to be set aside, which we hereby do. Appeal is allowed with consequential benefits, if any, as per law.