2018 (3) TMI 929 - AT - Service Tax

Levy of service tax - GTA - reverse charge - cost of transportation incurred for transportation of goods from Nepal to their factory - Held that - in all the SCN said Rule 2(1)(d)(v) of Service Tax Rules was invoked and said Rules required such persons to pay service tax who has paid transportation charges. It is undisputed fact that appellant has not paid freight charges. Therefore, they were not liable to pay service tax in the present proceedings - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Rule 2(1)(d)(v) of Service Tax Rules, 1994 regarding liability to pay service tax on transportation charges incurred for imported goods.

Analysis:
The three appeals before the Appellate Tribunal CESTAT, ALLAHABAD arose from a common Order-in-Appeal passed by the Commissioner (Appeals), Customs, Central Excise & Service Tax, Lucknow. The appellants had imported HTGS Wire from Nepal and filed a bill of entry, paying customs duty. The terms of purchase were FOR destination as per the purchase order. The Revenue contended that the appellants, being recipients of transportation services, were required to pay service tax on the cost of transportation from Nepal to their factory under Rule 2(1)(d)(v) of Service Tax Rules, 1994. Show cause notices were issued, and service tax was demanded. The impugned Order-in-Appeal upheld the demand of service tax along with interest and equal penalty. The appellants challenged this decision before the Tribunal.

The counsel for the appellant argued that the goods were purchased on a FOR destination basis, and the transportation charges were paid by the exporter in Nepal, making the Indian transporter a service provider to the overseas exporter. Since the appellants had not paid the freight charges, they contended that they were not liable to pay service tax under the relevant rule. On the other hand, the Revenue argued that since the appellant was the owner of the goods at the Indian border and had paid customs duty, including the freight charges, they were liable to pay service tax.

After considering the arguments and examining the records, the Tribunal found that the show cause notices invoked Rule 2(1)(d)(v) of Service Tax Rules, which required persons who had paid transportation charges to pay service tax. Since the appellants had not paid the freight charges, they were not liable to pay service tax in the present proceedings. Consequently, the Tribunal allowed the appeals filed by the appellants and directed that they shall be entitled to consequential relief as per law.