"The government vide its gazette notification No. 35 dated December 3, 2004, has made it mandatory that during transportation of goods, the trade or industry, who pays the freight, will be liable to pay service tax. The trading community feels cheated over the levy of service tax, which was supposed to be levied on transporters only," CAIT secretary general Praveen Khandelwal said in a statement in New Delhi.

The notification should be withdrawn immediately, he said, adding the traders are planning to launch nationwide agitation, including trade bandh, demonstrations and protests.

Khandelwal said the trading community did not come under the ambit of service tax and the government has imposed the tax in a "very clandestine manner".

Trade and industry were not service providers but service takers, he said and asked why the tax on transportation of goods was being imposed on them.

As per the notification, the trade and industry would have to register themselves under the Excise Act and deposit service tax with the government on transportation of goods from January 1, 2005, Khandelwal said.

The failure to do so would attract severe penalties in addition to tax and interest, he added.