By TIOL News Service

MUMBAI, SEPT 29, 2016: THIS is a Revenue appeal.

The respondent had been retained by the District Supply Office, Osmanabad to move food grains and other goods in the operation of the public distribution system and received a sum of Rs. 11,97,78,894/- between January 2005 and August 2009 on which service tax of Rs. 34,82,611/- was confirmed as due from them as provider of 'goods transport agency' service.

In appeal, the Commissioner (Appeals)held that individual truck owners are not providers of 'goods transport agency service' and relying on the decision in Kanaka Durga Oil Products Pvt. Ltd - 2009-TIOL-1123-CESTAT-BANG set aside the demand.

As mentioned, Revenue is in appeal before the CESTAT and submits that the cited Tribunal decision has been challenged in the Supreme Court. Revenue also contends that tax is leviable under section 65(105)(zzp) of FA, 1994 for providing of service by 'goods transport agency' which is defined in section 65(50b) and that with the recipient not being one of the entities listed in rule 2(1)(d)(v) of Service Tax Rules, 1994, it is the provider of the service who is the designated person liable to pay the tax.

The CESTAT, at the outset, observed -

+ Our decisions are binding on subordinate authorities and the existence of an appeal in which stay has not been obtained, not being an impediment, the first appellate authority has taken a course of action which cannot be faulted.

In the matter of the grounds taken in appeal, the Bench inter alia held -

++ Our decision in re Kanaka Durga Oil Product Ltd has excluded the individual truck owner from the purview of the tax in section 65(105)(zzp) of Finance Act, 1994. We have perused the definition of 'goods transport agency' in section 65(50b) of Finance Act, 1994 and find that an essential characteristic of provider of the service is the issuance of a consignment note. Revenue has resorted to a circular logic by claiming that rule 4B of Service Tax Rules, 1994 requires the goods transport agency to issue a consignment note. This, according to us, is a specious line of reasoning as the provider of 'goods transport agency' service being determined by issuance of consignment note under the statute, it is not within the ambit of a subordinate legislation to create the class of taxable persons by imposing a condition that would, perforce, bring such persons within the tax net. The intent and purpose of rule 4B has been misinterpreted by the reviewing authority.

++ The goods transported by the District Supply Officer are for a public service which involves a distribution chain. The distributors are mere designated outlets for the public distribution system and, till the transfer of title of the goods to the intended beneficiaries of the system, the goods are in the possession of the District Supply Officer; consequently, during the transportation stage, the respondent does not acquire any lien on the goods which is implicit in the issue of a consignment note. Therefore, no stretch of imagination can document issued by District Supply Officer conveying the goods transported be construed as a consignment note to render the respondent to be a 'goods transport agency'. The demand of tax therefore, fails.

In fine, the Revenue appeal was rejected.

(See 2016-TIOL-2566-CESTAT-MUM)