Goods Transport Services is defined as taxable service u/s 65(105)(zzp) of Finance Act 1994 in following words “any service provided or to be provided to a customer , by a good transport agency , in relation to transport of goods by road in a goods carriage;”
Who is responsible for payment of service tax ?
Liability to pay service tax in case of service of goods transport is based on status of consignor or consignee of goods and not on the payer of freight .
As per Rule 2(1)(d)(v) of the Service Tax Rule, 1994 , liability to pay service tax in case of goods transport service is on the person who pays or is liable to pay freight either himself or through his agent in all cases where the Consignor or Consignee of goods is
(a) any factory registered under or governed by the Factories Act, 1948
(b) any company formed or registered under the Companies Act, 1956;
(c) any corporation established by or under any law
(d) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India
(e) any co-operative society established by or under any law
(f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder or
(g) any body corporate established, or a partnership firm registered, by or under any law,
In all other cases , the goods transport agency shall be liable for payment of service tax.
For example , if a partnership firm sends goods to an Individual and the freight as per agreement is to be paid by the individual, the service tax on freight shall have to be paid by the Individual; only as per Rule 2(1)(d)(v).
So, in your case , since the freight is being paid by the proprietorship concern , the liability to pay service tax is on the proprietorship concern only as per the Rule 2(1)(d)(v) . The payment of service tax by the company is not as per law.