2016 (4) TMI 892 - AT - Service Tax

Liability of Service tax - Whether proceed of auction of warehoused imported goods, in case of importer abandoned the goods, shall be considered as service charges towards storage or warehouse - Held that - in the whole transaction, no service recipient is existing, therefore there is no question of providing any service to any person. Merely for the reason that Section 150 provides for distribution of the amount of proceed of auction that will not empowered the department to recover service tax on the auction proceeds. The Ld. Commissioner with proper application of mind given detailed finding not only on the facts but also on the law point of Section 48, 150 of Customs Act, 1962 and also discussed in detail the service tax provision and referred Master Circular dated 23/8/2007 and Board Circular dated 1/8/2002. Therefore, there is absolutely no infirmity in the order of the Ld. Commissioner (Appeals) and the same is sustainable. - Decided against the revenue

Summary

Issues involved: Whether proceeds of auction of warehoused imported goods, in case of importer abandoning the goods, should be considered as service charges towards storage or warehouse and are liable for service tax.

Analysis:
1. The appeal was against the Order-in-Appeal where the Commissioner set aside the Order-in-Original and allowed the respondent's appeal.
2. The issue revolved around determining if auction proceeds of abandoned imported goods should be considered as service charges for storage or warehouse, subject to service tax.
3. The Revenue argued that as per Section 150 of the Customs Act, the auction proceeds, when adjusted against storage charges, are liable for service tax as they represent payment for storage services.
4. The respondent contended that since the auction proceeds were not received from a service recipient, no service tax should apply, citing Board instructions exempting service tax on abandoned cargo.
5. The Tribunal analyzed the arguments and found that no service recipient existed in the transaction, making it ineligible for service tax. The Commissioner's detailed findings on Customs Act sections and service tax provisions supported this conclusion.
6. The Commissioner's decision highlighted that the auction proceeds were not for services but for the sale of goods, transferring ownership to the successful bidder, exempting it from service tax. Various circulars and instructions further supported this interpretation.
7. Relying on precedents and clarifications, the Tribunal upheld the Commissioner's order, dismissing the Revenue's appeal as there was no flaw in the decision.

This judgment clarifies the distinction between auction proceeds for goods and service charges, emphasizing the absence of a service recipient in determining service tax liability. The detailed analysis of Customs Act provisions and service tax laws, along with relevant circulars and instructions, supported the conclusion that auction proceeds for abandoned goods do not attract service tax, as they represent sale proceeds rather than service charges.