CESTAT held that recipient is liable to tax on service charges ancillary to GTA, not the provider of service

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Fact: M/s All Cargo Global Logistics Ltd. (“the appellant”) was registered with the Service Tax (ST) dept. under the taxable category of handling services, storage in warehousing services and goods transport agency (GTA) service. Audit was conducted by the revenue on August 21, 2012, it was noted that assessee had not discharged ST liability on the amount received by them from the service recipient in lieu of providing transportation of goods by road service, cargo handling, weighment charges and trailer detention charges. SCN dated January 16, 2014 was issued wherein service tax had been demanded from the assessee for the period March, 2011 to April, 2018 under the category of GTA service.

Appellant’s Interpretation of Law: The appellant contended that the entire demand had been proposed by revenue under the category of GST service holding that the charges, such as weighment, cargo handling, empty container transportation etc. were ancillary to the main service namely GTA service. Accordingly, as per the Circular No. 104/07/2008 dated August 6, 2008, the value of ancillary services had to be added to the main service.

It was further contended by the appellant that in case the ST liability on the charges recovered by the assessee on the ancillary services for the transport of goods was to be made chargeable, the same had to be recovered from service recipient who had paid freight charges as per provision of Section 68 r /w Service Tax Rules 2 (1)(d)(5) of Service Tax Rules, 1994.

Held: The Hon’ble CESTAT of New Delhi vide its Final Order No. 50051/2019 dated January 02, 2019 held that it was a settled principle that ancillary services are classifiable with the main service while observing that bills have been raised on consignor or consignee paying the freight for goods transportation in which case, person who pays freight have to pay the service tax on GTA service inclusive of all charges towards ancillary services. Accordingly, holds service tax demand on assessee as unsustainable, stating that SCN itself has wrongly been issued to the assessee as the liability to pay service tax should have been raised on person who has paid the freight.

Citation: [ TS-46-CESTAT-2019-ST ]