2016 (11) TMI 702 - AT - Service Tax

GTA Service reverse charge mechanism manufacture of grey fabrics import of yarn from Nepal separate invoice raised for expenses like transportation, clearance expenses etc is appellant receiving GTA services from exporter? - Notification No. 35/04-S.T - Held that - similar issue stand decided in the case of M/s. Chairman Silk Mills Pvt. Ltd. Versus C.C.E. Jaipur-II 2016 (8) TMI 946 - CESTAT NEW DELHI where it was held that the contract of appellant with the Nepalese suppliers is for supply of yarn and not for providing any particular service. Transport of goods is an activity incidental to the supply of goods for which Nepalese suppliers has engaged transporters. Nepalese suppliers had not 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. - appeal allowed.

Summary

Issues: Service tax liability on reverse charge basis for transportation from Nepal border to factory premises.

Analysis:
The appellants, engaged in manufacturing grey fabrics, imported yarn from Nepal. The Nepalese exporter issued two types of invoices: one for the goods' value and another for additional expenses like transportation, clearance, insurance, cartage, handling, and forwarding charges. The revenue contended that the transportation service from the Nepal border to the appellants' factory required them to discharge service tax liability on a reverse charge basis. Consequently, proceedings were initiated, resulting in 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, leading to the present appeal.

Upon review, it was noted that similar orders were passed for other appellants, whose appeals were allowed by the Tribunal. The Tribunal observed that the Nepalese suppliers, not the appellants, engaged the transporters and billed the appellants for both the goods' value and transportation expenses. The Tribunal emphasized that the appellants reimbursing the Nepalese suppliers for transportation expenses did not make them liable for service tax on GTA services. The Tribunal highlighted that the contract between the appellants and Nepalese suppliers was for the supply of goods, with transportation being incidental to the goods' supply. As there was no evidence of the Nepalese suppliers acting as agents of the appellants for transportation arrangements, the appellants could not be considered recipients of GTA services.

The Tribunal's decision in similar cases was followed by the present Bench in a related matter. Considering the issue's resolution in previous cases, the impugned order was set aside, and the appeal was allowed with consequential relief for the appellant.