Profit Earned In GTA Service Through Sub-Contractor Not Taxable As Business Auxiliary Service: CESTAT

The Bench of Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that “revenue’s attempt to charge service tax on the profit calling it business auxiliary service cannot be accepted because the service which the assessee provided to Jhakodia Minerals was GTA service. Part of the consideration received cannot be treated as a separate service because there is no evidence of any other service being provided”.

In this case, the assessee/appellant is registered with the service tax department under the category of “Goods Transport Agency Service”.

The assessee transported goods for Jakodia Minerals, Raipur and it charged them Rs. 200/- per metric ton per trip. It used the services of Bhupesh Kumar Agrawal for the purpose of paying him only Rs. 140/- per metric ton per trip.

Since service tax on GTA services were to be paid by the recipient of the service, the assessee paid service tax on the amount which it had paid to its sub-contractor Bhupesh Kumar Agarwal.

Audit formed an opinion that the profit of Rs. 60/- (Rs.200- Rs.140) which the assessee had earned is chargeable to service tax as “Business Auxiliary Service” under section 65(19) and as service not under negative list under section 65B (44) after 1.7.2012.

Accordingly, a Show Cause Notice was issued to the assessee demanding service tax on the difference between the amounts which the assessee had collected from its client Jakodia Minerals and the amounts which it had paid to its sub-contractor Bhupesh Kumar Agarwal treating it as consideration for providing ‘Business Auxiliary Service’.

The demand was confirmed by the Assistant Commissioner. Aggrieved by the decision of Assistant Commissioner the assessee filed an appeal to the Commissioner (Appeals) who rejected the appeal and upheld the order of the Assistant Commissioner. The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal.

The assessee contended that what the assessee had provided was GTA service using a sub-contractor. GTA service is chargeable to service tax at the hands of the service recipient as per Notification no. 30/2012-ST dated 20.6.2012. The assessee paid service tax on the service which it received from its sub-contractor. The demand of service tax on the profit which the assessee had earned by charging its client more and paying its sub-contractor less under the head ‘business auxiliary service’ which demand cannot be sustained.

The Tribunal observed that the activity or service provided in the case was GTA and it is undisputed that it chargeable to service tax under reverse charge and the service recipient has to pay the service tax. It is the same activity which the assessee had received from its sub-contractor and provided to its client. There is no separate activity. If that be so, it can only be called GTA service and the recipient has to pay service tax.

For the assessee, its sub-contractor was the service provider and the assessee paid service tax under reverse charge. For Jhakodia Minerals, the assessee was the provider of GTA service. That being so, the demand of service tax, if any could have been only under GTA service on Jhakodia minerals under reverse charge, added the bench

In view of the above, the Tribunal allowed the appeal.

Case Title: M/s Balajee Structural India Ltd. v. Commissioner of Central Excise & Service Tax

Case Number: SERVICE TAX APPEAL NO. 50124 OF 2018

Counsel for Appellant/ Assessee: Ankur Upadhyay

Counsel for Respondent/ Department: Aejaz Ahmad