CESTAT Delhi Upholds ₹2.89 Lakh Tax Demand On Transit Mixer Hiring, Rejects GTA Service Claim

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, on 16 October upheld a service tax demand of Rs. 2.89 lakh against Shri Sai RMC for hiring transit mixer (TM) machines, holding that the transaction was not covered under Goods Transport Agency (GTA) service.

A Bench comprising Judicial Member Ajay Sharma and Technical Member Hemambika R. Priya dismissed the appeal, finding that the case was covered by the Supreme Court's ruling in K.P. Mozika v. ONGC on the distinction between the transfer of the right to use goods and the provision of a service. It held:

“In the instant case, it is an admitted fact that the appellant provided TM Machines for transportation of RMC, and the requisition letter clearly states that the Driver, maintenance of the vehicles and cost of the diesel would be undertaken by the appellant... Hence, we find that the appellant's case is squarely covered by the Apex Court judgement supra.”

The dispute arose after the Department found discrepancies between the income tax TDS details and the service tax returns filed by Shri Sai RMC. The adjudicating authority confirmed a demand of Rs. 2.89 lakh on hiring charges for transit mixer machines, along with interest and penalties. The Commissioner (Appeals), Jaipur, upheld the demand.

Shri Sai RMC contended that it provided transportation services and had correctly paid service tax under the GTA category. The Department argued that the company had supplied two transit mixer machines to another firm at a monthly charge of Rs. 3.90 lakh while retaining responsibility for the drivers, maintenance and diesel.

The Tribunal observed that the classification depended on whether possession and effective control of the vehicles had been transferred. Under Section 65(105)(zzzzj) of the Finance Act, 1994, the supply of tangible goods for use without transferring the right of possession and effective control constitutes a taxable service.

It observed that a transfer of the right to use goods requires giving the customer exclusive effective control. Merely allowing a customer to use equipment while retaining operational control does not amount to such a transfer, bringing the transaction under the supply of tangible goods service.

Further, the Bench noted that Shri Sai RMC retained responsibility for the drivers, maintenance and diesel. It also found that the company had failed to produce evidence establishing that it provided GTA services, either before the adjudicating authorities or before the Tribunal.

Accordingly, the CESTAT upheld the service tax demand of Rs. 2.89 lakh, along with interest and penalties, and dismissed the appeal.

For the Appellant: None

For the Department: M.M. Rahman, Authorised Representative