No Tax Liability Without Consignment Note: CESTAT

In a recent ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) delivered a significant verdict in favour of a transporter (appellant), clarifying that service tax is not applicable on transportation services provided by road when no consignment note is issued and the entity does not qualify as a Goods Transport Agency (GTA) under the Finance Act, 1994.

Facts of the Case

The appellant, a proprietorship concern, was engaged in providing road transportation services during the financial year 2016–17. The business did not issue any consignment notes for the transportation services rendered and hence, did not pay service tax under the assumption that such services were covered under the negative list as per Section 66D(p) of the Finance Act, 1994.

Despite regular filing of service tax returns and paying applicable tax from time to time, the Revenue department initiated an investigation. Based on data obtained from the Income Tax Department (including Form 26AS), discrepancies were found between the turnover declared in the income tax filings and the value shown in service tax returns (ST-3). The Revenue claimed that the appellant received over ₹43 crore as “transportation receipts,” which was not properly reflected in service tax returns.

Show-Cause Notice and Adjudication

A show-cause notice (SCN) was issued on 5 October 2021, invoking the extended period of limitation. The Revenue alleged:

• Failure to issue consignment notes.

• Non-submission of crucial documents such as invoices and consignment notes.

• Possible ineligibility for reverse charge exemption under Notification No. 30/2012-ST.

• Suppression of facts with intent to evade tax.

The adjudicating authority confirmed the demand, treating the appellant as a GTA and imposed tax liability along with penalties.

Appellant’s Stand

The appellant contested the order, arguing:

• It did not issue consignment notes and hence could not be classified as a GTA under Section 65B(26) of the Finance Act.

• The services provided fell under the negative list as per Section 66D(p), which exempts transport services by road except those provided by GTA or courier agencies.

• Several judicial precedents have already established that transportation services without consignment notes do not attract service tax under GTA provisions.

The appellant cited multiple CESTAT rulings in their favour, including:

• Chartered Logistics v. CCE Ahmedabad-II

• Vaishnav Marbles Pvt. Ltd. v. Commissioner

• Tata Power Company Ltd. v. Commissioner

• Manak Chand Agarwal v. Commissioner

• Calcutta Ahmedabad Roadlines Pvt. Ltd. v. Commissioner

• Ballavpur Paper Manufacturing Ltd. v. Commissioner

  
  

Tribunal’s Findings

After hearing both sides, the CESTAT made the following key observations:

1. The appellant, being a proprietorship concern, had not issued any consignment notes — a mandatory requirement for classification as a GTA.

2. The adjudicating authority itself acknowledged that the services provided did not fall under the GTA category.

3. Under Section 66D(p) of the Finance Act, 1994, transport services by road (excluding services provided by a GTA or courier agency) are exempt from service tax.

4. As the appellant was not a GTA, the liability, if any, would have been on the service recipient under the reverse charge mechanism — but the Tribunal refrained from commenting on the recipient's liability as they were not party to the proceedings.

5. The extended period of limitation was not justified, especially when the appellant was regularly filing service tax returns.

   
   

Final Ruling

The Tribunal set aside the entire service tax demand along with any penalties imposed on the appellant. The appeal was allowed with consequential relief, reaffirming that transportation services by road without issuance of consignment notes do not attract service tax under the GTA category.

Key Takeaway:

This case reaffirms the principle that issuance of a consignment note is a sine qua non for an entity to be considered a GTA under the Service Tax law. Transporters not issuing such notes are outside the ambit of service tax under Section 66D(p) of the Finance Act, 1994. It also underscores the importance of proper classification and documentation to avoid unnecessary litigation.

1. What is a Goods Transport Agency (GTA) under service tax law?

A Goods Transport Agency (GTA) is defined under Section 65B(26) of the Finance Act, 1994 as any person who provides service in relation to transport of goods by road and issues a consignment note. Issuance of consignment note is essential for an entity to be classified as a GTA.

2. Is service tax applicable on transportation of goods by road?

Under Section 66D(p) of the Finance Act, 1994 (Negative List), transportation of goods by road is exempt from service tax, except when done by a GTA or a courier agency. If no consignment note is issued, the service is not taxable under service tax law.

3. If a transporter does not issue a consignment note, is it liable to pay service tax?

No. If a transporter does not issue a consignment note, it cannot be classified as a GTA and is not liable to pay service tax for transportation services.

4. Who is liable to pay service tax when transportation services are not provided by a GTA?

If services are not provided by a GTA, the service recipient (like a factory, registered dealer, etc.) is liable under reverse charge mechanism as per Notification No. 30/2012-ST.

5. Can the extended period of limitation be invoked for non-payment of service tax in such cases?

Not always. If the transporter has been regularly filing service tax returns and there is no deliberate suppression of facts, the extended period of 5 years cannot be invoked, as held in this case.

6. What was the main reason the demand in this case was set aside by CESTAT?

The CESTAT ruled that since the appellant had not issued consignment notes, it was not a GTA, and hence the service was covered under the negative list. Therefore, no service tax was payable and the entire demand was set aside.

7. What should transporters do to determine whether they are GTA or not?

Transporters should evaluate whether they issue consignment notes. If they do, they fall under GTA and service tax/reverse charge may apply. If not, they are not GTA and their services may be exempt.

8. Is a delivery challan the same as a consignment note?

No. A delivery challan is not equivalent to a consignment note. A consignment note must meet specific conditions such as being serially numbered and containing details of the consignment, consignee, consignor, and transporter.