The Customs, Excise AndService Tax Appellate Tribunal Chandigarh bench held that suppression cannot be alleged by department when Service Tax on GTA Service is not paid on bonafide belief. The services rendered to other GTA are exempted from the payment of service tax as GTA are also exempted from payment of service tax as per the entry 22 of the Notification No. 25/2012-ST dated 20.06.2012.

Rakesh Singhal, the appellant challenged the impugned order dated 04.03.2024 passed by the Commissioner (Appeals), whereby the Commissioner (Appeals) upheld the Order-in-Original dated 30.03.2022 passed by the Additional Commissioner, CGST, Rohtak whereby the Commissioner (Appeals) has confirmed the demand of Rs. 1,04,40,288/- under Section 73 of the Finance Act, 1944 read with Section 174 of Central Goods and Service Tax Act, 2017 along with appropriate rates of interest under Section 75 of the Finance Act and also imposed equal penalty under Section 78 of the act read with Section 174 of the CGST Act, vide the impugned order, also imposed penalty of Rs. 10,000 under Section 77(1)(c)(i) of the Act read with Section 174 of the CGST, Act.

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The appellant was running the proprietorship firm under the name of S.S. Cargo and was engaged in providing services in the category of Transport of goods by road/goods transport agency service (“GTA services”) to various companies & transporters. He was regularly filing its ST-3 returns in accordance with the provisions the Act and after deducting Tax deducted at Source (“TDS”), also regularly filed its Income Tax Returns (“ITRs”).

During the investigation, the Department on the basis of CBDT data of the appellant noticed certain discrepancies pertaining to sale of service figures as per the Service Tax Returns (“STR”) and value on which TDS has been deducted as per Form 26AS and as per ITR filed for the relevant period. Based on these discrepancies, show cause notice dated 24.12.2020 was issued to the appellant proposing demand of service tax on account of short payment of tax due to mismatch between its ST-3 and 26AS/ITR returns, by invoking the extended period of limitation.

The appellant filed reply on 01.04.2021 through speed post but no personal hearing notice was received by the appellant. Thereafter, the adjudicating authority confirmed the demand along with interest and penalty against the appellant, on the ground that the GTA services provided by the appellant qualify to be ‘taxable service’ under the Section 65B(51) of the Act and thus is liable to be subjected to service tax under the Section 66B of the Act.

The Order-in-Original was passed ex-parte on the ground that the appellant neither filed a reply to the show cause notice nor appeared for personal hearing. Aggrieved by the said order, the appellant filed the appeal before the Commissioner (Appeals) who vide the impugned order confirmed the demand along with interest and penalty.

Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the binding judicial precedents. It is a settled principle of law that demand cannot be raised on the appellant solely on the basis of difference between ST-3 and 26AS/ITR. She further submits that the Department failed in its duty to identify the activity on which the service tax is leviable, identify the service recipient and show that such differential amount of service tax demanded is in respect of a particular transaction/activity.

She has also placed reliance on the departmental instructions issued by CBIC vide letter dated 26.10.2021, wherein also the board emphasized on the fact that demand cannot be raised merely on the basis of difference between the ST-3 returns and figures given by income tax department.

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Counsel further submitted that the appellant was not liable to pay service tax on the services provided by them during the relevant period. She further submits that the appellant has rendered the services to body corporates who are liable to pay tax under Reverse Charge Mechanism as per Notification No. 30/2012-S.T. dated 20.06.2012. She further submits that the ‘body corporate’ can be interpreted as per the definition under Section 2(7) of the Companies Act, 1956 in accordance with Rule 2(1)(bc) of the Service Tax Rules, 1994 which includes any company incorporated outside India or company as defined under the Companies Act.

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Further, the counsel has also given the list of body corporates to whom the appellant provided GTA services which qualify as ‘company’ under the Section 2(20) of the Companies Act, 2013. She further submitted that the service which was rendered by the appellant to the body corporate can also be verified as per the MCA website and the same is also enclosed with the appeal paper book. She further submitted that by virtue of RCM Notification, the appellant is not liable to pay tax on the GTA services provided to the body corporates which amounting to Rs. 47,59,469.

Secondly, the services rendered to other GTA are also exempted from payment of service tax as per the entry 22 of the Notification No. 25/2012-ST dated 20.06.2012 vide which the service by way of giving on hire a means of transportation to other GTAs provided by the appellant is exempted from service tax subject to fulfillment of following two conditions namely:

(a) Service is by way of giving on hire a means of transportation of goods.

(b) The said services are provided to Goods Transport Agency.

She further submitted that the appellant provided vehicles on hire to various GTAs which has not been disputed in the impugned order. Further, she submits that the status of GTAs to whom the appellant has provided service can be verified on the basis of tax deduction and collection account number (TAN).

Counsel further submitted that for the period 2015-16 and 2016-17, the Form 26AS shows ‘Rakesh Singhal as one of the TDS deductor. She further submits that due to the mistake committed by the accountant of the appellant the vehicles owned by the appellant has been shown as vehicles as hired by the appellant and that is why TDS amount was deducted on the said vehicles.

She further submitted that Rakesh Singhal and the appellant are one and the same person and no service can be rendered by the Rakesh Singhal (proprietor) to its proprietorship firm as the proprietorship firm and the proprietor are one and the same person in the eyes of law. She further submits that by any stretch of imagination, the appellant Rakesh Singhal cannot render any service to itself and in the absence of two separate entities as service provider and service recipient, service tax cannot be leviable.

As regards the second issue that the appellant is not liable to pay service tax, the tribunal found that the appellant has rendered services to body corporate and vide Notification No. 30/2012-S.T. dated 20.06.2012 the taxable services provided by the GTA in respect of Transportation of goods by road where the person is liable to pay freight is body corporate established by or under any law, then the liability to pay service tax in such cases will be on the body corporate receiving GTA service by way of reverse charge mechanism and.

A two member S. S. Garg, Member (Judicial) and P. Anjani Kumar, Member (Technical) held that the services rendered to other GTA are exempted from the payment of service tax as GTA are also exempted from payment of service tax as per the entry 22 of the Notification No. 25/2012-ST dated 20.06.2012 because both the conditions which are required to be satisfied are satisfied by the appellant.

Further, the Department has failed to extend cum-tax benefit to the appellant which the appellant was entitled in view of Section 67(2) of the Act. As regards extended period of limitation. It was found that the appellant was regularly filing the ST-3 returns and the Department was aware of the fact that the appellant is providing GTA service. The appellant was under a bonafide belief that they are not liable to pay the service tax on GTA service and therefore, suppression cannot be alleged by the Department on the part of the appellant in order to invoke the extended period of limitation.

The Tribunal set aside the order by allowing the appeal of the appellant with consequential relief.