2016 (10) TMI 962 - AT - Service Tax

Reimbursement of expenses - Tax liability for expenses like transportation, clearance expenses, insurance charges, cartage handling and forwarding charges - reverse charge mechanism - import of Yarn - transportation from Nepal border - seperate billing for expenses like transportation, clearance expenses, insurance charges, cartage handling and forwarding charges - Held that - identical orders were passed in respect of other appellants similarly situate. It was held that There is no evidence produced to show that Nepalese suppliers had acted as the agents of the appellants for arranging transportation from Nepal border to the factory premises of the appellants. Just because the Nepalese suppliers had billed the appellants separately for transportation from Nepal border to factory premises alongwith other expenses, they do not become the agents of the appellants. In view of this, the appellants cannot be treated as recipients of GTA services in terms of Notification No. 35/04-S.T. and hence liable to pay Service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability on reverse charge basis for transportation services from Nepal to the appellant's factory premises.

Analysis:
The case involved the appellants, engaged in the manufacture of grey fabrics, who imported yarn from Nepal. The Nepalese exporter issued two types of invoices, one for the goods' value and the other for additional expenses like transportation, clearance, insurance, cartage, handling, and forwarding charges. The revenue contended that the transportation service from Nepal to the appellant's factory constituted a service received by the appellants, thus requiring them to discharge service tax liability on a reverse charge basis.

The proceedings initiated by the revenue led to an order by the Deputy Commissioner confirming a demand of ?60,750 along with penalties under sections 76, 77, and 78 of the Finance Act 1994. The Commissioner (A) upheld this order, prompting the present appeal before the Tribunal.

After considering similar cases where the Tribunal allowed appeals due to lack of evidence showing that the appellants had instructed Nepalese suppliers to engage transporters on their behalf, the Tribunal found that the appellants cannot be treated as recipients of Goods Transport Agency (GTA) services. The appellants' contract with the Nepalese suppliers was for the supply of goods, and the transportation arrangement was incidental to this supply, arranged by the suppliers. As there was no evidence of the Nepalese suppliers acting as agents of the appellants for transportation, the appellants were not liable to pay service tax on the transportation services.

The Tribunal cited a previous case where a similar issue was decided in favor of the appellants, setting aside the impugned order and allowing the appeal with consequential relief to the appellant. The decision was based on the principle that the appellants could not be considered recipients of GTA services as they did not engage the transporters directly or through the Nepalese suppliers, absolving them of the service tax liability in this regard.