Recipients of goods transport agency (GTA) services are not obligated to file the service tax already filed via the transport agency, The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) stated.
In the case presided over by Ramesh Nair (Judicial Member) and Raju (Technical Member), it was observed that when a service provider fulfils their obligation to pay service tax for a service, the demand for service tax on the same service from the service recipient cannot be upheld. It is unjust to impose service tax twice on the same service that has already undergone service tax.
The department argued that, according to the law, the appellant, as the recipient of GTA service, is responsible for paying service tax on GTA under the Reverse Charge Mechanism (RCM) as per Rule 2(i)(d)(v) of the Service Tax Rules, 1994.
They claimed that the service tax paid by the goods transport agency is essentially a deposit, and thus, the appellant must pay the service tax. The deposit made by the goods transport agency should not be considered a service tax on GTA, and consequently, the appellant should not be entitled to CENVAT credit.
The assessee countered this argument by asserting that demanding service tax from them, even though they are legally liable to pay it, amounts to double taxation on the same service, which is legally and logically incorrect.
Since the transport agency has already paid the service tax, and no challenge has been made to the assessment of that payment, they should be eligible for a credit of that amount under the law.
The department maintained that, even though the transport agency has paid the service tax, the payment should be considered a deposit, not a discharge of the service tax liability.
Therefore, the appellant is obligated to pay the service tax on GTA using the reverse charge mechanism, and they should not be entitled to a CENVAT credit.
In its judgment, the tribunal determined that the payment made by the transport agency in this case should indeed be considered as the payment of service tax, rather than a deposit.
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Consequently, there should be no demand for service tax from the appellant. Additionally, since the amount paid by the transport agency is confirmed to be the service tax, the appellant is entitled to claim CENVAT credit in accordance with the law.
| Case Title | Dhariwal Industries Limited Versus C.C.E. & C.-Anand |
| Citation | Service Tax Appeal No. 10603 of 2015-DB |
| Date | 11.10.2023 |
| Counsel For Appellant | Mayur Shroff |
| Counsel For Respondent | Prashant Tripathi |
| Ahmedabad High Court | Read Order |