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TMI Blog2025 (2) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... iod April 2005 to March 2000, the issue to be resolved by us is, verily, the scope for deploying of specific contingency in Finance Act, 1994, made operational by rule 2 of Service Tax Rules, 1994, Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 and Place of Provision of Service Rules, 2012 at different times, to the circumstances of their transactional engagement. That the appellant had engaged 'overseas logistics agents' in the course of delivering cargo shipped by their customers at doorstep of buyers is not in controversy. Nor too is the payment of tax liability on the charges pertaining to 'clearance of cargo' as provider of 'custom house agents' service' for the customers. The other component of cost of logistics were, on their submission of having been recovered from customers as 'reimbursements' for local procurement of services, judicially held to be beyond the pale of taxation. It is, thus, only the payments made to overseas logistics agents', similarly, for handling of cargo at the destination end, and which the appellant believed to be similarly excludible from value of the taxable services that remains in the dispute with the jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18th April 2006 as bereft of authority under law to fasten deemed providing of service by resting upon the decision of the Hon'ble High Court of Bombay in Indian National Shipowners Association v. Union of India [2009 (13) STR 235 (Bom)] which found approval of the Hon'ble Supreme Court, for the period thereafter till operation of 'negative list' regime by drawing upon the exclusion in rule 3(2) of Taxation of Services (Procured from Outside India and Received in India) Rules, 2006 and during the 'negative list' regime by invoking rule 4 of Place of Provision of Service Rules, 2012, were dealt with in separate constructs constituting the grounds of appeal for being erroneous. 4. We have heard Learned Chartered Accountant for the appellant and Learned Authorized Representative at length vis-à-vis their positions on the grounds of appeal. Learned Authorized Representative drew attention to the finding that appellant had, in addition to 'customs house agents service', rendered service taxable under section 65(105)(j) of Finance Act, 1994. He submitted that '55.11 In view of above, I find that the Noticee, along with their OLAs provided composite services squarely covered und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of Rule 2(1)(d)(iv), service tax can be levied on the members of the Petitioners-association. It is further to be seen here that Section 64 gives powers to the Central Government to make rules for carrying out the provisions of the Chapter. The chapter relates to taxing the services which are provided, the taxing on the value of the service and it is only the person who is providing the service can be regarded as an assessee. The rules therefore, cannot be so framed as not to carry the purpose of the Chapter and cannot be conflicted with the provisions in Chapter V of the Act. In other words, as the Act makes the person who is providing the service liable, the provisions in the Rules cannot be made which makes the recipient of the service liable. It is, thus, clear that the provisions of Rule 2(1)(d)(iv) are clearly invalid. 18. So far as reliance placed on the notification dated 31-12-2004 for justifying levy of service tax from the members of the Petitioners-association is concerned, that notification has been issued under sub-section (2) of Section 68 of the Act. Sub-section 2 of Section 68 reads as under :- 68(2) Notwithstanding anything contained in sub-section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the vessels and ships of the members of the Petitioners-association outside India. 20. It appears that a similar provision in the rules was made applicable by the Government in relation to the Clearing Agents by making customers of the Clearing Agent liable for levy of the service tax. That question has been decided by the Supreme Court by its judgment in the case of Laghu Udyog Bharati (supra) and the Supreme Court has clearly laid down that the imposition of the service tax is on the persons rendering the services and by making a provision in the Rules, levy of tax cannot be shifted to the recipients of the services and the Rule framed which brought about this situation has been declared by the Supreme Court to be invalid. The law laid down by the Supreme Court in its judgment in Laghu Udyog (supra) is squarely applicable to Rule 2(1)(d)(iv), which is relied on in this case. It appears that it is first time when the Act was amended and Section 66A was inserted by Finance Act, 2006 w.e.f. 18-4-2006, the Respondents got legal authority to levy service tax on the recipients of the taxable service. Now, because of the enactment of Section 66A, a person who is resident in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices' as not manifesting the rendering of any service. These two are demonstrated acts of judicial indiscipline ventured upon by the adjudicating authority. 7. The upholding of demand of Rs. 11,97,047 for the period prior to 18th April 2006 in the impugned order is blatantly in breach of the legal provisions, stipulated judicially, that enable levy of tax on services procured from abroad only with effect from 18th April 2006. For the period thereafter and till the subsisting of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, the mechanism for ensuring of credibility of parliamentary authorization, left unattended heretofore, for levy, in specified contingencies or not at all, on taxable services inextricably enmeshed with goods, specifies the identified enumeration of service to be deemed as provided in India only upon ascertainment of activity in relation to the goods. The adjudicating authority has referred to the entirety of transaction as 'end-to-end' before concluding that proportion of performance would have to be determined by actual value of such service vis-à-vis the whole. In that context, unwillingness to proffer the relativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se agent service' to be chargeable to tax for having rendered service taxable under section 65(105)(j) of Finance Act, 1994 which, when procured from overseas entities, was liable to tax, in terms of '3. Taxable services provided from outside India and received in India.- Subject to section 66A of the Act, the taxable services provided from outside India and received in India shall, in relation to taxable services (i) xxxxxxx (ii) specified in sub-clauses (a), (f), (h), (i), (j), (l), (n),....... of clause (105) of section 65 of the Act, be such services as are performed in India: Provided that where such taxable service is partly performed in India, it shall be treated as performed in India and the value of such taxable service shall be determined under section 67 of the Act and the rules made thereunder: (iii) xxxxxxx' in Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, only to extent performed in India by the appellant. On behalf of the appellant, it was submitted that these had not been rendered by them but, on behalf of their customers, through others. There is a very thin line, in taxation of services, between services procur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was performed in India.' which was intended to be invoked only when multiple locations of place of provision, including taxable territory, of services are established implying that precursor elimination or application through rule 4, rule 5, rule 6, and rule 9 to 12 and conclusion of more than one place of provision is warranted. The impugned order is studiedly silent on such processing. Indeed, it is questionable if, in the light of '5. The grounds and legal position as explained in earlier Show Cause Cum Demand Notices issued to M/s Modern Cargo Services Pvt Ltd by the Commissioner, Service Tax as mentioned in Para 3 is also applicable to the present case along with Section 66B and 66C of the Finance Act, 1994 w.e.f 01.07.2012; hence this statement of demand/show cause notice is issued in terms of Section 73(1A) of the Finance Act, 1994' in notices for 2012-13 and 2013-14 respectively and '9. The grounds and legal position as explained in earlier Show Cause Cum Demand Notices issued to M/s Modern Cargo Services Pvt Ltd by the Commissioner/Additional Commissioner of Service Tax as mentioned in Para 3 is also applicable to the present case; hence this statement of demand/sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2012 is not applicable. That the activity is transportation of goods is the foundation of the proceedings against the appellant, as is evident from the contrived segmentation of stages according to geography and from the unarguable existence of recipient outside India; Rule 10 of Place of Provision of Services Rules, 2012 is unambiguously clear about the consequent non-taxability.' 12. This decision relied upon circular [ no. 197/7/2016-Service Tax dated 12th August 2016 ] of Central Board of Excise and Customs (CBEC) which has clarified this '2.0 It may be noted that in terms of rule 10 of the Place of Provision of Services Rules 2012, (hereinafter referred to as 'POPS Rules, 2012', for brevity) the place of provision of the service of transportation of goods by air/sea, other than by mail or courier, is the destination of the goods. It follows that the place of provision of the service of transportation of goods by air/sea from a place in India to a place outside India, will be a place outside the taxable territory and hence not liable to service tax. The provisions of rule 9 of the POPS Rules, 2012, should also be kept in mind wherein the place of provision of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition excludes a person who provides a service on his account. 3.0 It follows therefore that a freight forwarder, when acting as a principal, will not be liable to pay service tax when the destination of the goods is from a place in India to a place outside India.' and squarely covering the facts of the present dispute. 13. It would appear that a notice issued for a period prior to 1st July 2012 in the era of taxation of enumerated services, under the impression of overlap of 'customs house agents service' and 'clearing and forwarding agents service' on fact and law as also of impression of applicability to activity for which payment was effected to overseas entity, was sought to be deployed when the boundaries of service was no longer defined and a new framework for identifying rendition eligible for exemption from tax and procurement liable to tax was established in Finance Act, 1994. In the process, the notices failed to elaborate on the manner in which the facts fitted the new scheme of tax liability and the adjudicating authority failed to take note of binding circulars and instructions on particular situations warranting eligibility. The clear, and unambiguous, stan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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