By TIOL News Service

MUMBAI, JAN 18, 2016: THE assessee, being recipient of GTA Services discharged service tax on reverse charge basis by availing the benefit of Notification No. 32/2004-ST, according to which service tax is liable to be paid on GTA services only on the value equivalent to 25% of the gross amount charged. As per the notification, exemption is not available in case Cenvat credit of input or capital goods used for providing such taxable services, has been taken or the Goods Transport Agency has availed the benefit under Notification No. 12/2003-ST.

In the SCN, it was alleged that the assessee has not complied with the said two conditions of the notification and accordingly proposed the denial of exemption notification No. 32/2004-ST. The assessee during the adjudication submitted declaration of almost all the transporters wherein it was certified that Transporters have neither availed Cenvat credit on input or capital goods nor availed Notification No. 12/2003-ST. The Adjudicating authority accepted the said declaration for limited period i.e. 1/1/2005 to 27/7/2005 and accordingly dropped service tax demand for the said period of Rs.8,86,990/-, however for the period subsequent to 27/7/2005, the said declaration was not accepted and while confirming the tax demand of Rs.65,93,433/- it was contended that as per the Board Circular Vide F.No. 137/154/2008-CX-4 dated 21/8/2008 such declaration can be accepted only till the date of issue of Board Circular No. B1/6/2005-TRU dated 27/7/2005 & subsequent to that period the assessee should have obtained declaration to the effect of non-availment of credit and Notification No. 12/2003 from the transporter on the consignment note.

Both, the assessee and the Revenue are in appeal before the CESTAT - the assessee aggrieved with confirmation of the tax demand and Revenue seeking imposition of penalty u/s 76 of the FA, 1994 on the confirmed portion of tax demand.

The appellant submitted that the requirement of declaration to be given on consignment note is prescribed by way of Board Circular and not provided in the notification and, therefore, non-compliance of procedural requirements cannot be a ground for denial of exemption. Case laws were also cited in this regard.

The AR supported the order of the adjudicating authority and reiterated the grounds contained in the appeal of the department.

The Bench observed-

+ The notification only contained the condition that GTA should not avail the Cenvat credit on input or capital goods and should also not avail exemption Notification No. 12/2003-ST. The notification does not prescribe any condition regarding submission of any certificate/declaration to this effect by GTA. The procedure was laid down in the clarificatory Board Circular. In such situation onus is on the Revenue to establish by proper investigation that GTA has availed the Cenvat credit and/or benefit of Notification no. 12/2003-ST before making allegation in the show cause notice and proposing denial of exemption notification No. 32/04-ST, which department failed to do so.

+ It is a fact that the declaration in the form of certificate was taken by the assessee from GTA and produced before the Adjudicating authority. The whole objective of the Board clarification and also condition of the notification is only to ensure that GTA has not availed the Cenvat credit and/or notification no. 12/2003-ST, whether such endorsement either given on the consignment note or independently by way of certificate /affidavit or on letter head by GTA is sufficient compliance, in our view both will suffice as far as compliance of the condition of the notification is concerned. Therefore, the certificate produced by the assessee to the Adjudicating authority is acceptable even for the period after 27/7/2005 also on the basis of which exemption Notification No. 32/2004-ST is admissible to the assessee and we hold so.

+ Without any investigations, Revenue could not have firstly issued show cause notice, secondly confirmed demand without bringing any evidence to the effect that GTA has availed Cenvat credit and/or Notification No. 12/2003-ST. For this reason also whole proceedings right from show cause notice to adjudication gets vitiated.

+ The exemption notification is availed by the assessee in the capacity of deemed service provider, therefore, any condition of the notification is applicable to the assessee only for discharging the service tax. In our view, only assessee themselves who have to satisfy the condition of the notification and not the GTA.

+ It will be a very absurd situation when ‘A' is availing exemption notification and ‘B' is required to fulfill the condition of the notification. Admittedly it is not case of the Revenue that the assessee have availed the Cenvat credit on input or capital goods used for providing services of GTA, therefore in our view, condition of the notification stands complied with.

The appeal of the assessee was allowed with consequential relief and that of Revenue was dismissed.

(See 2016-TIOL-184-CESTAT-MUM)