Service Tax Payable on Transportation Charges Paid for Customer and recovered later

In this case the appellant itself has arranged for transportation and paid the transportation cost and the same has been recovered from the bottlers. The contention of the appellant is that they were under bona fide belief that the transportation cost is borne by the bottlers and they are required to pay service tax. In this case, the appellant itself has arranged for transportation and paid transportation changes. In these circumstances, as per rule 2(l)(d)(iv) of the Ser­vice Tax Rules, 1994, the appellants are liable to pay service tax as they are pay­ing freight charges to the transporters on behalf of the bottlers and as per the said provisions, they are liable to discharge the service tax liability on the GTA services. As the appellant did not pay service tax therefore, I hold that the appellant is liable to pay service tax along with interest during the impugned period on GTA services

Full Text of CESTAT Order is as Follows:

The appellant is in appeal against the impugned order.

2. The facts of the case are that the appellant is engaged in the manufac­ture of  concentrate. The various bottlers who use the same to manufacture car­bonated beverages or fruit juice or pulp based drinks and the concentrate is transferred to the bottlers at the factory gate and the transportation cost was borne by the bottlers. As the appellant is paying transportation cost to the transporters and not paying service tax thereon, therefore, the show cause notices were issued to the appellant, to demand service tax under the category of GTA services along with interest and to impose penalty on the appellant by invoking extended period of limitation. The appellant paid service tax along with interest and did not pay penalty. The matter was adjudicated. The demand of service tax along with interest was confirmed against the appellant and penalties were also imposed. Aggrieved from the said order, the appellant is before me.

3. The learned Counsel for the appellant submits that as per the purchase agreement, the transportation cost was borne by the bottlers not by the appellant. The appellant have only arranged for transportation of concentrate on behalf of the bottlers and has paid the transportation cost which has been recovered from the bottlers, in that circumstances, the appellant is not liable to pay service tax although the appellant has paid service tax along with interest, therefore, no penalty is imposable on the appellants and extended period of limitation is not invocable as there was no mala fide intention of the appellant not to pay service tax on GTA services in the light of the decision of this Tribunal in the case of I1T v. 2010 (17) STR 420 (Tri.-Bang.) which have been affirmed by the Hon’ble High Court in the case of the Hon’ble Andhra Pradesh High Court reported in 2012 (26) S.T.R. 97 (A.P.).

4. On the other hand, the learned AR submits that as the appellant itself has arranged for transportation and paid transportation cost which has been recov­ered from the bottlers. In that circumstance, the transportation service has been utilised by the appellant. They are liable to pay service tax thereon. The appellant cannot take the benefit of bona fide intention as the appellant itself has arranged transportation and paid the transportation changes to the transporters. In that circumstances, the extended period of limitation is rightly invoked and the pen­alty is rightly imposed on the appellant.

5. Heard the parties and considered the submissions.

6. In this case the appellant itself has arranged for transportation and paid the transportation cost and the same has been recovered from the bottlers. The contention of the appellant is that they were under bona fide belief that the transportation cost is borne by the bottlers and they are required to pay service tax. In this case, the appellant itself has arranged for transportation and paid transportation changes. In these circumstances, as per rule 2(l)(d)(iv) of the Ser­vice Tax Rules, 1994, the appellants are liable to pay service tax as they are pay­ing freight charges to the transporters on behalf of the bottlers and as per the said provisions, they are liable to discharge the service tax liability on the GTA services. As the appellant did not pay service tax therefore, I hold that the appellant is liable to pay service tax along with interest during the impugned period on GTA services.

7. The next issue arises that whether the appellant was under bona fide belief that they are not liable to pay service tax?

8. I find that in this case the appellant has arranged for transportation and paid transportation charges, in that circumstances, the appellant is liable to pay service tax on GTA services under reverse charge mechanism. Therefore, I hold that the extended period of limitation is rightly invoked in this case.

8. The next issue arises, whether the appellant can be given the benefit of section 80 of the Finance Act, 1994 to impose penalty or not? In this case, the appellant has paid service tax along with interest and the appellant has not got any benefit. In that circumstances, the benefit of section 80 can be given to the appellant. By giving the benefit of section 80 of the Finance Act, 1994, I drop the penalty against the appellant.

9. At this stage, the learned AR objected that it is not clear that the appellant has discharged the service tax liability or not. This fact is to be verified at the end of the adjudicating authority. Therefore, the matter is remanded back to the ad­judicating authority to verify the fact whether the appellant has paid the service tax along with interest or not, if Service tax has paid along with interest, the pro­ceedings against the appellants shall come to an end otherwise the adjudicating authority is at the liberty to pass an order in terms of law.

10. With these terms the appeal is disposed of by way of remand.