Big Relief for Small Transporters: No Service Tax Without Consignment Note

In a much-needed relief for small transporters and single truck owners, the Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that transport services provided without issuing consignment notes fall under the Negative List and are not liable to service tax.

This important decision protects small logistics providers from unfair tax demands and brings clarity to a long-standing confusion over the classification of Goods Transport Agency (GTA) services.

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The Case in Focus: Bajrang Enterprise vs. Service Tax Department

The case involved Bajrang Enterprise, a sole proprietorship engaged in road transportation services using its own truck. During an audit, the tax department raised a demand for service tax, claiming that Bajrang Enterprise’s activities were taxable under the category of Goods Transport Agency.

However, Bajrang Enterprise argued that it never issued consignment notes, which is a key requirement for classification as a GTA. The matter was taken to the CESTAT Kolkata Bench for resolution.

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What is a Consignment Note and Why Is It So Important?

A consignment note is a crucial document in the transportation business. It serves as:

• Proof of acceptance of goods for transport
• A legal contract between the transporter and the customer
• A record showing who is responsible for the goods during transit

Without issuing a consignment note, a transporter cannot legally be classified as a Goods Transport Agency.

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CESTAT’s Ruling: No Consignment Note, No Service Tax

The CESTAT carefully examined the facts and ruled that:

1. Bajrang Enterprise operated as a single truck owner.
2. The business did not issue any consignment notes.
3. Without consignment notes, the service does not meet the definition of GTA as per Section 65(26) of the Finance Act, 1994.
4. Transport services by individual truck operators fall under the Negative List and are not taxable.

As a result, the service tax demand was set aside, giving full relief to the appellant.

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Why This Matters: Key Takeaways for Transporters

This ruling offers a lifeline to thousands of small-scale transporters across India who often get caught in unnecessary tax disputes.

Key Points:

• No consignment note = No service tax liability.
• Negative List protection applies to genuine small transport operators.
• Tax authorities cannot impose service tax without proper legal classification.

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How Does This Impact GST?

Though this case relates to the pre-GST service tax era, the concept of consignment notes remains crucial under Goods and Services Tax (GST) as well. Under GST:

• Only transporters issuing consignment notes are classified as Goods Transport Agencies (GTA).
• Single truck owners without consignment notes typically remain exempt from GST on transportation services.

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Conclusion: A Fair Judgment for Small Transporters

The CESTAT Kolkata ruling reinforces the importance of proper legal interpretation when it comes to taxation of services. It ensures that small truck owners who provide genuine transport services without issuing consignment notes are not unfairly burdened with taxes meant for larger, organized transport agencies.

This decision not only brings relief but also highlights the need for fair compliance and regulatory understanding in India’s complex tax system.

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FAQs:

Q1: What is the key takeaway from this CESTAT ruling?
Small transporters without consignment notes are not liable to service tax.

Q2: What defines a Goods Transport Agency (GTA)?
A GTA must issue a consignment note to be classified as such under the law.

Q3: Does this apply under GST?
Yes, the concept of consignment notes and GTA classification is relevant in GST as well.

Q4: Who benefits from this decision?
Small truck owners, single vehicle operators, and unorganized transport businesses.

Q5: What is the Negative List in service tax?
It refers to services that are not taxable under the Finance Act, 1994.

📅 Published on: 11 July 2025
✍️ Author: CS Chhavi Goyal