2020 (3) TMI 845 - AT - Service Tax

CENVAT Credit - input services - courier services - services received in India from the foreign service providers/co-loaders - reverse charge mechanism - period from May 2006 to August 2007 - CBEC Circular dated 31.10.1996, F.No. 341/43/96 - HELD THAT - The issue decided in the case of FIRST FLIGHT COURIERS LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI-II 2016 (8) TMI 145 - CESTAT MUMBAI where it was held that the services received by the courier agency from the co-loader is not liable to Service Tax, and further where such service is provide by a co-loader situated outside India, the said activity is beyond the territorial jurisdiction of Service Tax Law and on this account also not taxable. The issue is wholly revenue neutral, as the appellant courier agency is entitled to input service credit and moreover, they have admittedly paid tax on the gross amount, and on this score also, the part of the amount cannot be taxed again, which is incurred by them for payment to co-loader (overseas). Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of a courier agency to pay Service Tax on input services received from foreign service providers/co-loaders under the 'Reverse charge mechanism' from May 2006 to August 2007.

Analysis:
The appellant, a courier agency providing courier services, was paying Service Tax on the gross amount received from service receivers. The Revenue contended that the appellant should pay Service Tax on the input services received in India from foreign service providers/co-loaders under the 'Reverse charge mechanism' for the period from May 2006 to August 2007. The appellant availed services of overseas agencies, their group companies, for receiving and distributing consignments meant for delivery overseas.

The appellant argued that the issue was settled as per Circular of CBEC dated 31.10.1996, F.No. 341/43/96, which stated that charges of co-loaders to courier agencies were recovered by the agencies from customers, and Service Tax was paid on the gross amount. Referring to previous decisions, the appellant contended that services received by the courier agency from co-loaders were not liable to Service Tax, especially when provided by co-loaders outside India. The Tribunal in earlier cases had held that such activities were beyond the territorial jurisdiction of Service Tax Law and not taxable.

The Tribunal, considering the Circular and precedent decisions, held in favor of the appellant. It was noted that the issue was revenue neutral as the appellant was entitled to input service credit and had already paid tax on the gross amount. Therefore, the part of the amount incurred for payment to co-loader (overseas) could not be taxed again. The appeal was allowed, and the impugned order against the appellant was set aside, granting consequential benefits if any.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the services received by the courier agency from foreign service providers/co-loaders were not liable to Service Tax under the 'Reverse charge mechanism.' The decision was based on the Circular of CBEC and previous judgments, emphasizing that the issue was revenue neutral as the appellant had already paid tax on the gross amount received.