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TMI Blog2018 (6) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... n or an amount received for promoting the postal services. Such incentives are given by the postal authority to encourage use of franking machines, especially where the volumes are above a certain threshold level - these are required to be taxed under Business Auxiliary Services. Appeal allowed - decided in favor of appellant. - Appeal No. ST/00199/2010 - Final Order No. 41849 / 2018 - Dated:- 20-6-2018 - Shri Madhu Mohan Damodhar, Member ( Technical ) And Shri P Dinesha, Member ( Judicial ) Ms. Radhika Chandra sekhar, Advocate for the Appellant Shri S. Govindarajan, AC (AR) for the Respondent ORDER Per Shri Madhu Mohan Damodhar, The appellants are engaged in providing mailing services using franking machines obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 51,22,977/- with interest thereon and imposition of penalties under various provisions of the Act. In adjudication, the Commissioner, vide the impugned order No. 60/2009 dated 28.10.2009, dropped the demand for tax liability prior to 16.06.2005, however, confirmed the liability subsequent to that date as proposed in the notice. Penalties under Section 77 and 78 of the Act were also imposed. Hence, this appeal. 3. Today when the matter came up for hearing, on behalf of the appellants Ld. Advocate Ms. Radhika Chandra Sekhar made oral and written submissions, which can be broadly summarized as under: (i) That the postage is a statutory duty as defined by the Indian Post Office Act and that this statutory duty is permitted to be pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that inclusion of franking cost in the service charges receivable by the Appellant from the client would be contrary to Post Office Act. The Supreme Court in the case of CST Vs. Bhayana Builders (Civil Appeal nos. 1335-1358 of 2015 dated 19.02.2018) has held that therefore, any amount charged which has no nexus with the taxable service and is not a consideration for the service provided and does not become part of the value which is taxable under Section 67. (viii) The Supreme Court in the case of UOI Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. (Civil Appeal No. 2013 of 2014 dated 07.03.2018), has struck down Rule 5(1) of the Valuation Rules, 2006 which provides for inclusion of expenditure or costs incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are, therefore, of the firm view that the franking cost cannot be made part of the value of taxable service. 7. Coming to the controversy on rebate received from the postal department, it cannot be treated as a commission or an amount received for promoting the postal services. Such incentives are given by the postal authority to encourage use of franking machines, especially where the volumes are above a certain threshold level. We, therefore, do not find any merit in the adjudicating authority s stand that these are required to be taxed under Business Auxiliary Services. 8. In arriving at these conclusions, we draw sustenance from the decision of the Tribunal in United Mailing Services (supra) relied upon by the Ld. Advocate w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered by that Department to those who contracted with the appellants. 9. In our opinion, this is a superficial and casual view of the transaction. The Central Government alone can, under Section 16 of the Indian Post Office Act, 1898, cause postage stamps to be provided and also prescribe the duties and remuneration of persons selling postage stamps, Franks are an alternative means of paying postal charges and franking machines are provided to bulk mailers. It would appear that a casual and superficial examination of the activity has been undertaken by the original and appellate authority in scrutinizing the taxability. The nature of the transaction between the appellants, the entities that contracted with the appellants and the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the articles. The franking charges are collected as reimbursement because the statutory mandates in the Post Office Act do not permit them to act as agent unless specifically designated under the corresponding Rules as agent. That is an entirely different function and has a statutory sanction accorded to it. Inclusion of franking cost in the service charge receivable by the appellant from the client would be contrary to the Post Office Act. Thus, the transaction of franking or usage of the postal service is solely between the appellants and the post office with the former as a customer of the latter. The depiction of the latter as a client is not consistent with this reality and the categorization under Section 65(19)(vi) fails the test o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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