2018 (10) TMI 84 - AT - Service Tax

Business Support Services - appellant is a manufacturer of excisable goods namely MS Angles MS Channels and MS Rounds - appellant had arranged trucks for delivery of the said final products at customer s destination and for such activity it had collected delivery charges from the customers - Department interpreted that such extra amount retained by the appellant for delivery of the goods at the premises of the buyer should be considered as a taxable service under the category of Business Support Service . Held that - Perusal of the purchase orders placed by the buyers on the appellant transpires that they placed orders for supply of the goods manufactured by the appellant. There were no separate agreements between the buyers and appellant for providing any service over and above supply of goods - there is no involvement of a service provider and a service receiver relationship in the sale transaction made between the parties. Since transportation cost incurred was in context with delivery of goods at the buyers premises it cannot be said that such facility extended by the appellant should be considered as a taxable service leviable to service tax under the category of business support service - thus the activities undertaken by the appellant do not confirm to the definition of taxable service for the purpose of levy of service tax thereon. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of taxable service under 'Business Support Service' for extra amount retained by the appellant for delivery of goods.

Analysis:
The case involved the appellant, engaged in manufacturing excisable goods and registered under the Service Tax statute. The dispute arose when the audit wing observed that the appellant collected delivery charges from customers, paid a lump sum for transportation, and retained the balance reflected as 'Freight Reimbursement'. The department considered the retained amount as a taxable service under 'Business Support Service', initiating show cause proceedings resulting in a service tax demand confirmation and penalty imposition. The appellant appealed, arguing that the delivery charges were related to the sale of goods, not a separate taxable service. They contended that providing transportation did not support buyers' business and the trucks used were owned by the appellant, exempting them from service tax liability.

Upon hearing both sides and reviewing the records, the Tribunal found that the appellant was a manufacturer of excisable goods, fulfilling Central Excise duty obligations. Purchase orders placed by buyers were for goods supply without separate service agreements. Invoices reflected goods' value, levies, and transportation costs for delivery at buyers' premises. The Tribunal concluded that the transportation arrangement merely facilitated delivery of goods and did not constitute a taxable service under 'Business Support Service'. The appellant's activities did not support buyers' business, aligning with the definition of taxable service for service tax levy.

The Tribunal, after detailed analysis, set aside the impugned order, ruling in favor of the appellant. The judgment clarified that the appellant's activities did not meet the criteria for a taxable service under 'Business Support Service', thereby rejecting the service tax demand and penalty imposed by the department.