2010 (6) TMI 170 - AT - Service Tax

Goods Transport Agency Service- Yarn imported from Nepal. Demand on GTA service alleged as received for transportation of goods from Nepal border to factory premises. Appellant in India whether to be treated as person liable to service tax. Held that- the Commissioner has clarified that the charges for transportation of the imported yarn in Nepal upto Indo Nepal border an included in the value of the goods on which customs duty is charged and the dispute in these cases as to whether the appellants are liable to pay service tax on the transportation charges for the transportation of the imported yarn from Indo Nepal border to the appellants factory premises. More over the Commissioner s report confirms that it is the suppliers who arranged the transport of the goods from Indo Nepal border to the appellants factory premises and made payment for the same to the transporters. Just because, the appellants were billed separately for the transport expenses alongwith other expenses, the suppliers do not become the agents of the appellants. Thus, the impugned orders are not sustainable. The same are set aside and the appeals are allowed.

Summary

Issues Involved:

1. Liability of appellants to pay Service Tax on GTA services.
2. Jurisdiction of Single Member Bench to hear the appeals.

Detailed Analysis:

1. Liability of appellants to pay Service Tax on GTA services:

The primary issue revolves around whether the appellants, who are manufacturers of fabrics and import yarn from Nepal, are liable to pay Service Tax on Goods Transport Agency (GTA) services for transportation of goods from the Nepal border to their factory premises. The appellants argue that they neither engaged the transporters nor were liable to pay freight charges directly to them. Instead, they reimbursed the Nepalese suppliers for the transportation costs, among other expenses. The Department contends that the appellants, by reimbursing the freight charges to the suppliers, acted as receivers of the GTA services and thus were liable to pay Service Tax.

The appellants' defense hinges on Notification No. 35/04-S.T., dated 3-4-2004, which specifies that the person liable to pay Service Tax on GTA services is the one who pays or is liable to pay the freight either by himself or through his agent. The appellants assert that since they did not engage the transporters and were not directly liable to pay the freight, they should not be considered liable for the Service Tax.

The Department, however, maintains that the appellants' transactions with the suppliers cannot be said to be on an FOR basis, as the suppliers issued separate invoices for the value of goods and for transportation and other expenses. The Department argues that the appellants should be treated as recipients of GTA services through the Nepalese suppliers, who acted as their agents.

Upon reviewing the records, it was found that there was no evidence showing that the appellants had instructed the Nepalese suppliers to engage the transporters on their behalf. The Nepalese suppliers had engaged the transporters and billed the appellants for the transportation charges, which the appellants reimbursed. The Tribunal concluded that merely reimbursing the transportation expenses does not make the Nepalese suppliers agents of the appellants. Therefore, the appellants cannot be treated as recipients of GTA services and are not liable to pay Service Tax.

2. Jurisdiction of Single Member Bench to hear the appeals:

The Department raised an objection regarding the jurisdiction of a Single Member Bench to hear these appeals, citing sub-section 3 of Section 35D of the Central Excise Act, 1944. This provision states that a Single Member Bench can dispose of cases where the duty involved or the penalty does not exceed Rs. 10 lakhs, provided the case does not involve issues related to the rate of duty or valuation.

The Tribunal clarified that the issue at hand does not pertain to the rate of duty or valuation but rather to whether the appellants are liable to pay Service Tax under the provisions of Rule 2(1)(d)(v) of the Service Tax Rules, 1994, read with Notification No. 35/2004-S.T. Since the duty involved in these cases does not exceed Rs. 10 lakhs and does not involve valuation or rate of duty issues, the Single Member Bench has the jurisdiction to decide these appeals.

Conclusion:

The Tribunal held that the impugned orders were not sustainable and set them aside, allowing the appeals. The appellants were not liable to pay Service Tax on the GTA services as they did not engage the transporters directly or through the Nepalese suppliers, who were not their agents. The Single Member Bench had the jurisdiction to hear and decide these appeals.