No Consignment Note, No GTA Tax: CESTAT Quashes Service Tax Demand on Transportation of Tobacco Leaves
Pranav B Prem
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad has held that transportation of goods by road cannot be classified as Goods Transport Agency (GTA) service in the absence of a consignment note, and therefore Service Tax cannot be levied on such activity. Setting aside multiple demands issued against Indian Tobacco Traders, the Tribunal ruled that where the statute prescribes a specific document — in this case, a consignment note — taxation under GTA is not attracted if such a document is not issued.
The appeals arose out of three Show Cause Notices alleging non-payment of Service Tax on outward freight incurred for transporting tobacco leaves, redried lamina and stems. The appellant, engaged in procurement and processing of tobacco, regularly hired individual truck operators for transport of agricultural goods to various warehouses and factories. However, as recorded in the proceedings, these truck operators never issued any consignment note, bilty, challan or goods receipt — documents that are statutorily required for classifying a road transport service as GTA.
Despite this, the Department treated the activity as GTA service and confirmed Service Tax demands on the basis that after the 2006 amendment replacing the term “commercial concern” with “any person,” even transportation by individual truck operators qualifies as taxable service. The adjudicating authority relied on this view and confirmed tax, interest and penalties. The first appellate authority upheld the confirmations, prompting the present appeals before CESTAT.
Before the Tribunal, the appellant argued that the very foundation of GTA classification — issuance of a consignment note — was missing. It was submitted that the weighment slips and payment acknowledgments maintained in the appellant’s system were internal documents for quantity tracking and payment and did not contain compulsory particulars such as serial number, consignor/consignee information, vehicle number, description of goods, points of origin and destination, and tax liability. Therefore, they could not legally constitute consignment notes. The appellant also emphasized that transportation by persons other than a goods transport agency falls within the Negative List under Section 66D(p)(i) and is therefore non-taxable. Judicial precedents across multiple CESTAT benches were cited in support of the proposition that “no consignment note means no GTA”.
The Department contended that any form of written record accompanying goods — including slips, chits or informal notes — could be treated as a consignment note and relied on earlier Tribunal and High Court rulings that interpreted GTA expansively, even without a formal consignment note.
Rejecting the Department’s position, the Tribunal relied on the judgment of the Supreme Court-affirmed Chartered Logistics Ltd. decision and the recent Bothra Shipping Services ruling of CESTAT Hyderabad, reiterating that the existence of a consignment note is the sine qua non for GTA classification. It observed that the law does not envisage oral consignment notes or substitute documents; a consignment note must mandatorily contain specific particulars laid down in Rule 4B of the Service Tax Rules. The Tribunal further recorded that none of the documents produced in the present case resembled or approximated a consignment note, and therefore GTA tax could not be attracted.
The Bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) concluded that the issue is “no longer res integra” and that transportation of goods without issuance of a consignment note falls outside the ambit of GTA. The Tribunal also noted that once GTA classification fails, the question of tax liability on the consignor or consignee does not arise, and consequently, interest and penalties cannot survive.
Holding that the Service Tax demands lacked legal foundation, the Tribunal allowed all three appeals and granted consequential relief to the appellant, thereby striking down the demands in their entirety.
Appearance
Counsel For Appellant: S. Sankaravadivelu
Counsel For Respondent: A. Rangadham
Cause Title: Indian Tobacco Traders Versus Commissioner Of Central Tax
Case No: Service Tax Appeal No. 30390 of 2018
Coram: Angad Prasad (Judicial Member), A.K. Jyotishi (Technical Member)
