2016 (4) TMI 1383 - HC - Service Tax

Liability of service tax of respondent KSFE for the transactions which were subject of consideration - HELD THAT - In Muthoot FinCorp. Ltd. v. CCE, Visakhapatnam 2009 (8) TMI 236 - CESTAT, BANGALORE , the Tribunal had taken the view that similar transactions were not exigible to service tax. The concept of the transaction is that KSFE provides service by releasing funds to a person in India, as a result of the money transferred through M/s. Paul Merchants Ltd., which is PML , for short. The Tribunal has noted that as a matter of fact, if a person pays money in England or elsewhere outside India to be given to his relative in India and the KSFE by virtue of the sub-representation agreement arranges to deliver the said money to the beneficiary on verification of identity, for this exercise, the KSFE does not charge any amount as commission or fee from the recipients of the amount. The charge if any levied by the company outside India on the person who pays the amounts is not a transaction in India. The CESTAT was justified abundantly in following the ratio of Muthoot FinCorp and deciding that KSFE, which was in appeal before the CESTAT, was entitled to an order as has been granted by the Tribunal - Appeal dismissed.

Summary

Issues:
Whether the respondent KSFE was liable to service tax for the transactions under consideration.

Analysis:
The High Court of Kerala considered the appeal to determine whether the CESTAT was correct in holding that the respondent KSFE was not liable to service tax for the transactions in question. The court referred to a previous judgment in Muthoot FinCorp. Ltd. v. CCE, Visakhapatnam, where the Tribunal had ruled that similar transactions were not subject to service tax. The court explained that KSFE provides a service by releasing funds to a person in India through M/s. Paul Merchants Ltd. without charging any commission or fee from the recipients. The court highlighted that the charge levied by the company outside India on the person who pays the amounts is not considered a transaction in India. Therefore, the CESTAT's decision to follow the precedent set in Muthoot FinCorp and rule in favor of KSFE was deemed justified. The High Court upheld the CESTAT's decision and dismissed the appeal, finding no merit in it.

In conclusion, the High Court of Kerala dismissed the appeal after analyzing the issue of whether KSFE was liable to service tax for the transactions in question. The court relied on the precedent set in a previous case to support the decision that KSFE's transactions were not subject to service tax. The court emphasized that the nature of the transactions and the absence of commission or fee charged by KSFE from the recipients played a crucial role in determining the tax liability. Ultimately, the court upheld the CESTAT's decision and ruled in favor of KSFE, setting aside the Commissioner of Service Tax's order.