2014 (10) TMI 310 - AT - Service Tax

Waiver of pre-deposit - Import of service - Courier service - dispute is in respect of import of shipment where customers pays consideration to the local DHL entity abroad. Held that - The shipments were booked by the service recipient with service provider i.e., DHL entity and both are located outside India. The applicants are only receiving such consignments and delivering in India. As per the agreement The DHL will compensate to the applicants in case the applicants fail to make up the cost. In the present proceedings there is no evidence on record to show that the applicants received any such compensation. In view of the decision in the case of Paul Merchants Ltd vs CCE, Chandigarh & others reported in - 2012 (12) TMI 424 - CESTAT, DELHI (LB) as the service provider and service recipient is outside India we find prima facie merit in the contention of the applicant that the applicant are not liable to service tax. In respect of other shipments mentioned are (iii) of para 3 where overseas customers pay consideration to overseas DHL entity we find that the service provider and service recipient is within India though consideration for service is paid by the recipient of the shipment. As per the applicants such shipments were only 7 or 8%. Prima facie we find that the applicants had not made out a case in respect of such shipments. Taking into facts and circumstances of the case the applicants are directed to deposit the amount equal to 10% of the demand confirmed within eight weeks and report compliance on 18.11.2014. On deposit of the above mentioned amount, the pre-deposit of the remaining dues are waived and recovery thereof stayed for hearing the appeal - Partial stay granted.

Summary

Issues:
1. Waiver of pre-deposit of service tax, interest, and penalties.
2. Interpretation of service tax liability for courier services involving import and export shipments.
3. Application of service tax in cases where service provider and recipient are located outside India.

Analysis:
The judgment deals with an application for waiver of pre-deposit of a substantial service tax amount along with interest and penalties. The applicant, an international courier service provider, was issued a Show Cause Notice by the Revenue regarding service tax liability on activities related to handling shipments in India. The main contention was whether the applicant should pay service tax on compensation received for services in India where delivery is made, especially in cases of import shipments where overseas customers paid consideration to an overseas entity. The Revenue relied on agreements to support its claim.

The adjudicating authority upheld the demand, emphasizing that the applicant did not consider compensation received for services in India when discharging service tax liability. However, the applicant argued that they were paying service tax on revenue earned from courier business generated within India as per contractual agreements with overseas entities. They highlighted that they were not receiving compensation for shipments delivered in India which were booked abroad.

The Tribunal noted that the applicant was providing courier services for various transactions, including import shipments where customers paid consideration to the overseas entity. In cases where the service provider and recipient were outside India, the Tribunal found merit in the applicant's argument that they were not liable to pay service tax. However, for shipments where customers paid consideration to overseas entities, the Tribunal directed the applicant to deposit 10% of the demand within a specified time frame, with the remaining dues waived upon compliance.

In conclusion, the judgment clarifies the service tax liability for courier services involving import and export shipments, especially when service providers and recipients are located outside India. It highlights the importance of considering contractual agreements and the specific circumstances of each transaction to determine the applicability of service tax.