2018 (11) TMI 1159 - AT - Service Tax

Scope of Courier Service - non-payment of service tax under the head - service provided worldwide - export of services or not - Circular No 96/7/2007-ST dated 23.08.2007. Held that - It is quite evident that in case of Export pre-paid UPS Worldwide has provided Courier Agency Service to Appellants, and in case of Import Prepaid and Export Freight Collect, appellants have provided Courier Agency Services to UPS Worldwide - In the agreement, by the use of phrase in the export and import of freight forwarding of express documents/ parcels and shipments it is quite evident that both appellant and UPS Worldwide are engaged in providing Express Cargo Service . The service as provided by UPS Worldwide to Appellant will be covered by Express Cargo Service as has been clarified by the Circular No 96/7/2007-ST dated 23.08.2007. In case of Export Pre-paid, where the consignments are booked by the Appellant for delivery in for territory appellants receive the services from UPS Worldwide for picking up the said consignments from International Airport for delivery in foreign territory. Since Appellants have received the services from UPS Worldwide and the origin of the said services is within India, service tax required to be paid by UPS Worldwide is to be paid by the Appellant on reverse charge mechanism as provided for in Section 66A of Finance Act, 1994 read with rule 3(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - It is quite evident from the agreement that entire services provided by the appellant to UPS Worldwide for picking up the consignments in case of Export Freight Collect and for delivery in the case of Import pre paid have been provided in India. Since these services are provided in India, they are liable to service tax. Exemption from Tax - Export of services or not - Held that - In view of the fact the no component of service has been provided by the appellant outside India, the services provided by them to UPS Worldwide cannot be termed as export of services, even if the payment against them are received in convertible foreign exchange. Thus exemption claimed by the appellant against provision of these services, by treating them as export of service is not admissible. Penalty - Held that - Since the charge of suppression with intent to evade payment of tax has been upheld by us, the penalty under Section 78 is justified and upheld. - Also the penalties under Section 77, for non filing of proper returns and submission of complete information are upheld. Demand of Interest - Held that - Demand for interest under Section 75 of Finance Act, 1994 is also upheld Appeal dismissed - decided against appellant.

Issues Involved:
1. Classification of services as "Courier Service".
2. Applicability of the Export of Service Rules, 2005.
3. Invocation of extended period of limitation.
4. Justification of penalties under Section 78 and 77 of the Finance Act, 1994.
5. Demand for interest under Section 75 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of services as "Courier Service":
The core issue was whether the services provided by the appellants qualify as "Courier Service" under Section 65(33) of the Finance Act, 1994. The Tribunal concluded that the appellants and UPS Worldwide were engaged in the export and import of freight forwarding of express documents/parcels and shipments. The Tribunal noted that the definition of "Courier agency" includes any person engaged in door-to-door transportation of time-sensitive documents, goods, or articles, either directly or indirectly. The Tribunal held that UPS Worldwide provided "Courier Agency Service" to the appellants in the case of Export Pre-paid consignments, and the appellants provided "Courier Agency Service" to UPS Worldwide in the case of Import Prepaid and Export Freight Collect consignments.

2. Applicability of the Export of Service Rules, 2005:
The appellants claimed exemption from service tax, treating the services provided as export of services under the Export of Service Rules, 2005. The Tribunal examined the agreement between the appellants and UPS Worldwide and found that the appellants performed the entire services within India and no part of the service was provided outside India. The Tribunal held that for services to be treated as export of services, some part of the service needs to be performed outside India and the payment must be received in convertible foreign exchange. Since the services were entirely performed in India, the exemption claimed by the appellants was not admissible.

3. Invocation of extended period of limitation:
The appellants argued that the extended period of limitation should not be invoked as all facts were disclosed during the audit in February 2010. The Tribunal, however, found that the appellants had not disclosed the amount of payment received for services provided to UPS Worldwide in their ST-3 returns and had not disclosed the agreement between the appellants and UPS Worldwide. The Tribunal held that the appellants had knowingly suppressed relevant information from the revenue, justifying the invocation of the extended period of limitation for demanding service tax.

4. Justification of penalties under Section 78 and 77 of the Finance Act, 1994:
The Tribunal upheld the penalties under Section 78 for suppression of facts with intent to evade payment of tax, referencing the Supreme Court's decision in Vandana Arts Print Pvt Ltd. The Tribunal also upheld the penalties under Section 77 for non-filing of proper returns and submission of complete information.

5. Demand for interest under Section 75 of the Finance Act, 1994:
The Tribunal upheld the demand for interest under Section 75, citing the Supreme Court's decision in Kerala State Electricity Board, which held that the liability to pay interest is statutory and arises from the failure to deposit the tax within the prescribed time.

Conclusion:
The Tribunal dismissed the appeal, upholding the demand for service tax, interest, and penalties as determined by the Commissioner. The Tribunal found no merit in the appellants' arguments and affirmed the classification of services as "Courier Service," the applicability of the extended period of limitation, and the imposition of penalties and interest.

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