2016 (12) TMI 542 - AT - Service Tax

Levy of tax - transportation charges - reverse charge mechanism - import of yarn from Nepal - Held that - I find that in an identical case, in the case of M/s. Radha Mohan Textiles Pvt. Ltd., M/s. Opel Sulz Pvt. Ltd. and M/s. Sai Leela Synthetics Pvt. Ltd. Versus C.C.E. Jaipur-II 2016 (10) TMI 962 - CESTAT NEW DELHI , this Tribunal has allowed the appeal in favour of the appellant holding that the appellant is not liable to pay service tax on the transportation charges under reverse charge mechanism. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on transportation charges under reverse charge mechanism.

Analysis:
The case involved the appellant, engaged in manufacturing grey fabrics, importing yarn from Nepal, with the supplier billing for goods and transportation charges to the appellant's premises. The Department contended the appellant was liable for service tax on transportation charges under reverse charge mechanism. The adjudication order upheld this tax liability.

The appellant's consultant argued that as the goods supplier engaged transporters independently for delivery to the appellant's factory, the appellant had no direct involvement with the transporters and thus should not be liable for service tax. The consultant cited a precedent from the Tribunal supporting this argument.

On the contrary, the Revenue representative reiterated the findings of the impugned order, emphasizing the service tax liability on the appellant for transportation charges.

After hearing both sides and reviewing the records, the Tribunal noted a similar case where it had ruled in favor of the appellant, stating that the appellant was not liable for service tax on transportation charges under reverse charge mechanism. The Tribunal highlighted that the Nepalese suppliers, not the appellants, had engaged the transporters and billed the appellants for transportation expenses, making the appellants not directly responsible for engaging the transporters or paying them. Consequently, the Tribunal allowed the appeals filed by the appellants, finding no merit in the impugned orders regarding service tax liability on transportation charges.

In conclusion, the Tribunal ruled in favor of the appellants, citing the lack of evidence showing the appellants' direct involvement in engaging transporters, thereby absolving them from the service tax liability on transportation charges under reverse charge mechanism.