Levy of service tax on GTO service under RCM prior to 04.2006 is ultra virus

Show cause notice of demand of service tax on Goods transport operator/goods transport agency [GTO/GTA] services received by the appellant for the disputed period, in terms of the prevailing Section 73 under reverse charge.

Order of the Tribunal

• Issue of levy of service tax on GTO service, on the receiver of service under reverse charge mechanism was held ultra virus by the Hon‟ble Supreme Court in the case of L. H. Sugar (supra) by judgment dated 27.07.2005.
• Further, the Court Quoted judgment of Hon‟ble Bombay High Court in the case of Indian National Shipowners Association that held that service tax cannot be levied under reverse charge mechanism prior to 04.2006, when Section 66A was introduced and/or inserted in the Finance Act, providing for levy of service tax from the receiver of service, under reverse charge mechanism. This ruling has been confirmed by Hon‟ble Supreme Court.
• Futher the, Hon‟ble Supreme Court in case of Laghu Udyog Bharati by its judgment dated 27.07.1999, have held the provision of levy under reverse charge basis, as per Rule 2(1)(d) of the Service Tax Rules in the case of GTO service, as ultra virus the Finance Act, 1994.

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