2018 (11) TMI 927 - AT - Service Tax

GTA services - Freight charges - appellant engaged in the business of export of Boneless Buffalo Frozen Meat - reverse charge mechanism - Held that - The demand of around ₹ 67 lakhs of service tax was raised by Revenue on the basis of presumption that entire expenditure on account of freight recorded in the balance sheet for the period covered by show cause notice was taxable - the entire demand of around ₹ 67 lakhs is presumptive and the same cannot sustain. It was presumed by Revenue that commission was paid to the foreign commission agent for export. It is clear from the record that Revenue did not scrutinise any record and did not take into consideration the persons to whom commission was paid and raised the demand under presumption that the commission was paid to foreign entity and also presumed that such entity did not have any Office in India - demand on account of commission is also presumptive. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax liability on freight charges under Reverse Charge Mechanism.
2. Service tax liability on security charges.
3. Service tax liability on commission paid for export.

Analysis:

Issue 1: Service tax liability on freight charges under Reverse Charge Mechanism
The appellant was engaged in exporting "Boneless Buffalo Frozen Meat" and was registered with the Service Tax Department. The Revenue alleged that the appellant should have paid service tax under the Goods Transport Agency Service on the freight charges shown in the balance sheet. The Revenue demanded a service tax amount of around &8377; 67 lakhs based on the presumption that the entire expenditure on freight was taxable. The appellant argued that the freight charges included various elements and were covered by a specific Notification, resulting in a refund from the Revenue. The Tribunal found the demand to be presumptive and unsustainable, as the Revenue did not scrutinize the transactions comprehensively.

Issue 2: Service tax liability on security charges
Regarding the demand of around &8377; 2 lakhs on security charges, the appellant contended that the service tax liability was discharged by the service provider and cited a precedent to support their argument. The Tribunal agreed with the appellant, noting that the service tax paid by the service provider could not be demanded again from the appellant to avoid double taxation. The demand was deemed unsustainable.

Issue 3: Service tax liability on commission paid for export
The Revenue alleged that the commission paid for export should attract service tax, presuming it was paid to a foreign agent. The appellant argued that the commission was paid to a person in the taxable territory of India and not a foreign entity. The Tribunal found that the Revenue did not scrutinize the records or consider the recipients of the commission, leading to a presumptive demand of around &8377; 5 lakhs. The Tribunal held the demand to be presumptive and unsustainable, ultimately setting aside the impugned order and allowing the appeal.

In conclusion, the Tribunal found the demands made by the Revenue to be presumptive and not sustainable due to lack of comprehensive scrutiny and consideration of specific circumstances. The appellant's arguments regarding the nature of transactions and applicable tax provisions were upheld, resulting in the appeal being allowed.