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TMI Blog2016 (9) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice 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 – H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India Applicant Customs Clearance in India Customs House Agent Local Transportation in India by road Goods Transport Agency 2. Applicant shall contract with an IATA member airline for transportation of consignment; the airline shall issue an Airway Bill (Awb) to the applicant. Awb shall govern the terms of contract for transportation of cargo between the airline and the applicant on a principal to principal basis. Further, applicant shall not contract with the airline as an agent of its customer. Instead, the Awb shall lay down the terms and conditions assumed by the airline and the applicant on their own account. Therefore, in case the cargo consignment is damaged during the transportation, the applicant shall have an independent right against the carrier to recover damages in accordance with the Carriage Act and the Montreal Convention. In majority of the cases, applicant as the carrier shall further issue a House Airways Bill ( House Awb ) upon its customer, i.e. the original consignor, as the shipper. The applicant s customer shall have independent access to contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer. Applicant intends to discharge its service tax liability under the Finance Act, 1994 for each and every activity in provision of services to the customer separately as an unbundled service as they are separate services, to be sold individually. Applicant further submits that commercially, the earning of the applicant for all the services rendered shall be the differential between the fee charged from the customer and the charges paid to subcontractors. In case of international freight, the differential amount being the freight margin. Therefore, there may be situations wherein the applicant ends up making a loss to retain a customer when the cost of execution of the shipment through the carrier has escalated more than the fee charged form the customer. 5. During the personal hearing on 01.07.2016, applicant made an oral plea that there was an unintended error in question B raised by them and transportation of goods by air be read as transportation of goods by air and/or sea , which was accepted by this Authority. Therefore, applicant has raised following questions before this Authority for ruling; A. Whether the freight margin recovered by the applicant from its cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the applicant by providing services as intermediary, Service Tax is leviable on the amount earned as commission or margin. In short, Revenue has raised 2 issues in respect of subject application, both in respect of inbound shipment and outbound shipment. First is that freight margin recovered by the applicant from the customers is in respect of intermediary service in terms of Rule 9 (c) of POP Rules and therefore, place of provision of service shall be location of service receiver. Second issue is that the service provided by the applicant is single indivisible bundled service in terms of Section 66F of the Finance Act, 1994. Both issues, i.e. in respect of inbound shipment and outbound shipment are taken up together, being same. 7. First issue is whether freight margin recovered by the applicant from the customer would be covered by intermediary service in terms of Rule 9 (c) of POP Rules. Rules 9 (c) of said Rules inter-alia states that the place of provision of intermediary services shall be the location of the service provider. Intermediary is defined in terms of Rule 2(f) ibid and means a broker, an agent or any other person, by whatever name called, who arranges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to the customer. 9. 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. 10. Revenue submits that the main service of transportation of goods is provided by the Airlines /Shipping Agency and not by the applicant. Therefore, Rule 10 of POP Rules will not be applicable in respect of the applicant. Applicant submits that said Rule 10 is wide to cover not only the actual transportation, but also a person who arranges for the transport; that this is expressly clear from the exclusion to mail or courier from Rule 10 of POP Rules; that proviso to Rule 10 suggests the place of provision of service in respect of goods transport agency (GTA); that but for sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive list shall comprise of the following services, namely:- (p) services by way of transportation of goods (ii) by an aircraft or a vessel from a place outside India to the customs station of clearance in India; 14. In view of said Section 66 D (p) (ii), transportation goods by aircraft or vessel from a place outside India to India prior to 01.06.2016 shall be covered by the negative list of services and shall not be liable to Service Tax, as per Section 66 B ibid. 15. With effect from 01.06.2016, aforesaid section 66 D (p) (ii) of the Finance Act, 1994 has been omitted vide the Finance Act, 2016 of 2016. Therefore, services by way of transportation of goods by an aircraft or a vessel from a place outside India up-to the customs station of clearance has been deleted from the negative list. However, such services by an aircraft will continue to be exempted as such benefit has been extended to said service vide Notification No. 9/2016-ST dated 01.03.2016 (S. No. 53) w.e.f. 01.06.2016. In view of above, freight margin recovered by the applicant from its customer or a Freight Partner in a inbound shipment is exempt from levy of Service Tax provided to transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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