CESTAT Ahmedabad Rules Out Second Service Tax Demand on GTA Services Already Taxed
Background of the Dispute
The case of Saibaba Chemicals Industries Vs Commissioner of C.E. & S.T. (CESTAT Ahmedabad) concerns a manufacturing unit engaged in the production of excisable goods classified under Chapter 29 of the Central Excise Tariff Act, 1985. An audit of the assessee’s Central Excise records for the period from April 2011 to March 2015 triggered a controversy regarding liability under the Reverse Charge Mechanism (RCM) for Goods Transport Agency (GTA) services.
During the audit conducted in July–August 2015, the Department noticed that the assessee had availed transportation services from M/s. Kaveri Transport Carriers but had not discharged Service Tax under RCM on the corresponding freight. The Department’s stand was that, since the assessee was a partnership firm paying freight for transport of goods by road in a goods carriage, it was squarely liable to pay Service Tax under Section 68(2) of the Finance Act, 1994, read with Rule 2(1)(d)(i)(B) of the Service Tax Rules, 1994 and Notification No. 30/2012-ST dated 20.06.2012 (as amended).
On this basis, a Show Cause Notice dated 08.01.2016 was issued proposing:
- Demand of Service Tax of Rs. 1,17,881 for the period April 2011 to March 2015, invoking the proviso to
Section 73(1)of the Finance Act, 1994 - Recovery of interest under
Section 75 - Penalties under
Section 78(1)andSection 77read with the relevant Service Tax Rules
Despite a detailed written reply dated 25.09.2016 from the assessee, the Adjudicating Authority confirmed the entire demand along with interest and penalties vide Order-in-Original dated 28.09.2016. The first appeal before the Commissioner (Appeals), Central Excise and GST, Vadodara, was also rejected through Order-In-Appeal dated 28.09.2017. This led to the present second appeal before the CESTAT Ahmedabad.
Assessee’s Core Contentions
1. Service Tax already discharged by GTA
The assessee’s principal argument was that M/s. Kaveri Transport Carriers had already:
- Charged Service Tax in its invoices,
- Collected the tax component from the assessee, and
- Deposited the same with the Government treasury.
To substantiate this, the assessee produced a comprehensive set of documentary evidence, including:
- Service Tax registration certificate of M/s. Kaveri Transport Carriers
- Sample transport invoices clearly charging Service Tax
- Declarations issued by the transporter
- Copies of ST-3 returns of the transporter
- Challans evidencing payment of Service Tax
- Working sheets demonstrating computation of tax
The assessee emphasized that, since the same taxable service had already borne Service Tax in the hands of the transporter, raising a second demand under RCM on the assessee would amount to double taxation of one service transaction.
2. No second recovery permissible under RCM
The assessee accepted, as a matter of legal position, that under the statutory scheme for GTA services, liability is normally fastened on the service recipient in certain specified cases. However, it was forcefully argued that:
- Once the Government has already received the due Service Tax from the service provider,
- The Department cannot again demand the same tax from the service recipient under
Section 68(2).
The assessee relied on settled judicial principles that Service Tax cannot be levied twice on the same service, regardless of whether such tax has been paid by the provider or the recipient. In support, reliance was placed on earlier CESTAT Ahmedabad decisions, notably:
- Omori India Pvt. Ltd. Vs CCE – 2017 (11) TMI 759 – CESTAT Ahmedabad
- Gurudev Dystuff (India) Pvt. Ltd. Vs CCE – 2018 (2) TMI 1399 – CESTAT Ahmedabad
These rulings affirm the proposition that where the service provider has already discharged Service Tax liability, the Department is barred from re‑collecting tax from the service recipient for the same taxable service.
3. Revenue neutrality
The assessee further invoked the doctrine of revenue neutrality. The argument ran as follows: