The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has upheld a service tax demand of ₹2,89,224 against a business supplying transit mixer machines for transporting ready-mix concrete, rejecting its claim that the activity qualified as Goods Transport Agency (GTA) service.

The bench of Ajay Sharma (Judicial Member) and Hemambika R. Priya (Technical Member) found that the appellant had failed to produce evidence, including consignment notes, establishing that it was providing GTA services and upheld the classification adopted by the departmental authorities and dismissed the appeal. 

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The appellant/assessee challenged an order passed by the Commissioner (Appeals), Central Excise and CGST, Jaipur.

The department initiated verification after examining third-party income-tax information. It sought documents relating to financial years 2012–13 to 2015–16 and scrutinised the appellant’s Form 26AS and service tax returns.

According to the department, the returns reflected payment of service tax on GTA services and on manpower recruitment or supply services under the reverse charge mechanism. However, Form 26AS also reflected deductions under Sections 194C and 194I of the Income-tax Act, prompting further examination of the receipts.

A show cause notice dated March 28, 2018, proposed recovery of ₹11,84,194 in service tax, together with interest and penalties.

The adjudicating authority subsequently confirmed a reduced demand of ₹3,34,371. This comprised ₹19,047 relating to job work, ₹2,89,224 relating to transit mixer machine hiring charges and ₹26,100 relating to renting of immovable property. It also imposed interest, an equivalent penalty under Section 78 and a penalty of ₹10,000 under Section 77(1)(c) of the Finance Act, 1994.

The Commissioner (Appeals) dropped the ₹19,047 demand concerning ready-mix concrete cleared on a job-work basis.

However, the Commissioner upheld the demand relating to transit mixer hiring charges. The appellant had received ₹23.40 lakh and paid service tax of ₹72,306, along with interest of ₹4,140, treating the activity as transportation of goods by road.

The appellate authority examined a requisition letter issued by M/s Sai Nath RMC for two transit mixer machines at a monthly amount of ₹3.90 lakh. Under the arrangement, the appellant was responsible for providing drivers, maintaining the vehicles and bearing diesel costs.

The Commissioner concluded that the receipts were taxable in full as hiring charges for transit mixer machines. The order also provided for appropriation of the tax already paid.

In its appeal, Shri Sai RMC argued that the vehicles had been provided for transportation against freight payments and that control over them had not been handed over to the customer.

It maintained that it had correctly paid service tax after claiming the benefit available to GTA services. It also challenged the classification adopted by the authorities and the penalties imposed.

No representative appeared for the appellant before the Tribunal despite several opportunities. The Bench recorded that a final opportunity had been granted at the hearing on July 14, 2026. With neither an appearance nor an adjournment request when the matter was subsequently called, the Tribunal proceeded on the basis of the appeal memorandum and the department’s submissions.

The Tribunal examined Section 65(105)(zzzzj) of the Finance Act, 1994, which covered the supply of tangible goods for use without transferring possession and effective control.

It explained that physical delivery alone does not determine whether a transaction involves a transfer of the right to use goods. The contractual terms and the actual manner of operation must also be examined.

Relevant considerations include control, deployment, operation, maintenance, movement, licences, personnel and the permitted use of the equipment. The Tribunal observed that a transfer of the right to use generally requires the customer to obtain effective control and the ability to use the goods to the supplier’s exclusion during the agreed period.

The Bench also considered the Supreme Court’s January 9, 2024, judgment in K.P. Mozika v. ONGC. As discussed in the order, that judgment distinguished a transfer of the right to use goods from a service arrangement in which substantial control remains with the contractor. Shri Sai RMC

The Tribunal noted that the appellant supplied transit mixer machines and remained responsible for drivers, maintenance and diesel.

It also emphasised the absence of evidence supporting the claimed GTA classification. No evidence of consignment notes had been produced before the lower authorities, and the appellant placed no further supporting material before the Tribunal.

The Bench concluded that the case was covered by the Supreme Court judgment discussed in its order and found no infirmity in the Commissioner (Appeals)’ decision.

It accordingly upheld the impugned order and dismissed the appeal, leaving the disputed service tax demand of ₹2,89,224 undisturbed.

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