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2016 (9) TMI 291 - AAR - Service TaxTaxability of services provided in relation to outbound shipment and inbound shipment freight margin - Rule 2(f), Rule 9(c), Rule 10 of Place of Provision (POP) Rules, 2012 - scope of the term Intermediary M/S Global Transportation Services Private Limited (hereinafter also referred to as applicant seeks to provide logistics solutions to its customers, comprising of number of services, which are mutually exclusive and can be provided on a standalone basis. - Held that - In the case before us, applicant would enter into an agreement with the carrier for transportation of cargo i.e. airline/shipping line. This service agreement would be on principal to principal basis and not as agent of said airline/shipping line. Therefore, applicant would be covered by the exclusion clause i.e. provides the main service- inbound and outbound shipment on his own account in terms of Rule 2(f) of POP Rules and thus not covered under Rule 9 ( c) ibid as intermediary service. Therefore, place of provision of said service will not be location of service provider. Place of provision of service of transportation of goods shall be the place of destination of the goods, as per Rule 10 of POP Rules. In the case of outbound shipment destination of goods shall be outside India. Therefore, place of provision of service of outbound shipment shall be outside India - no Service Tax on freight margin recovered by the applicant from the customer. Inbound shipment Held that - upto 31-5-2016, exemption provided to transportation of goods by aircraft and vessel under Section 66 D of the Act as same is service by way of transportation of goods by air or sea from a place outside India into Indian Customs area - However, exemption provided to transportation of goods by aircraft has been extended vide Notification No. 9/2016-ST (S. No. 53) w. e. f. 01.06.2016 in view of exemption notification inbound shipment not taxable. Bundled service section 66F of the act Held that - activities of the applicant are mutually exclusive and can be provided on standalone basis service provided does not come under bundled service. Transportation of goods by aircraft and vessel - Section 66D of the Act Held that - section 66D negative list existed prior to 1-6-2016. From 1-6-2016 negative list entry withdrawn. CENVAT credit input services Held that no service tax leviable on applicant no question of CENVAT credit.
Issues Involved:
1. Taxability of freight margin recovered by the applicant in outbound shipments. 2. Exemption of freight margin recovered by the applicant in inbound shipments. 3. Applicability of service tax on the differential freight margin. 4. Entitlement to avail CENVAT credit on input services. Issue-wise Detailed Analysis: 1. Taxability of Freight Margin in Outbound Shipments: The applicant, M/S Global Transportation Services Private Limited, sought clarity on whether the freight margin recovered from customers in outbound shipments is taxable under the Finance Act, 1994. The applicant argued that the place of provision of service would be outside India as per Rule 10 of the Place of Provision (POP) Rules, 2012. The Revenue contended that the service provided is a single indivisible bundled service and should be taxed on the gross amount received. The judgment concluded that the freight margin recovered by the applicant in outbound shipments is not taxable under the Finance Act, 1994, as the place of provision of service is outside India, aligning with Rule 10 of the POP Rules. 2. Exemption of Freight Margin in Inbound Shipments: The applicant also sought clarity on the taxability of the freight margin recovered in inbound shipments, citing the exemption provided under Section 66 D of the Finance Act, 1994. The Revenue argued that the main service of transportation is provided by the Airlines/Shipping Agency and not by the applicant. The judgment highlighted that prior to 01.06.2016, transportation of goods by aircraft or vessel from outside India to the customs station in India was covered under the negative list of services and thus exempt from service tax. Post 01.06.2016, the exemption for transportation by aircraft continued under Notification No. 9/2016-ST. Therefore, the freight margin in inbound shipments is exempt from service tax up to 31.05.2016, and the exemption for transportation by aircraft continues thereafter. 3. Applicability of Service Tax on Differential Freight Margin: The applicant questioned whether they are liable to discharge service tax only on the differential freight margin retained in both outbound and inbound shipments. Given the rulings on issues A and B, the judgment found this question to be infructuous, implying that there is no need to address this issue further as the primary concerns have been resolved in favor of the applicant. 4. Entitlement to Avail CENVAT Credit on Input Services: The applicant also sought clarity on their entitlement to avail CENVAT credit if their final output service is held taxable. Similar to issue C, this question was deemed infructuous due to the favorable rulings on the primary issues. Conclusion: A. The freight margin recovered by the applicant from its customer in an outbound shipment is not taxable under the Finance Act, 1994, as the place of provision of service is outside India. B. The freight margin recovered by the applicant from its customer or a Freight Partner in an inbound shipment is exempt from service tax under the Finance Act, 1994, up to 31.05.2016, with continued exemption for transportation by aircraft post 01.06.2016. C & D. Questions C and D are rendered infructuous based on the rulings in A and B.
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