Custom, Excise & Service Tax Tribunal
Commissioner. Service Tax-Delhi Ii vs United Worldwide Courier Pvt Ltd on 14 February, 2024
ST/50087/2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
Service Tax Appeal No. 50087 of 2017
(Arising out of Order-in-Original No. 07-09/YG/CE/ST/2016 dt.31.08.2016 passed by the
Commissioner of Central Excise, Gurgaon-I)
Commissioner of Service Tax
Delhi-II ......Appellant
th
5 Floor, 14-15 Farm Bhawan,
Nehru Place, New Delhi - 110 019
VERSUS
United Worldwide Courier Pvt. Ltd.,
111, Humayunpur, Safdarjung Enclave,
New Delhi - 110 029 ......Respondent
Appearance Present for the Appellant: Shri S.K. Meena, Authorized Representative Present for the Respondent: Shri Prabhat Kumar, Advocate Coram:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER No. 55109/2024 Date of Hearing: 14.02.2024 Date of Decision: 14.02.2024 [Order per: P. ANJANI KUMAR] Heard both sides and perused the records of the case.
2. Brief facts of the case are that M/s United Wordwide Courier Pvt Ltd.,1 is an international express company and have registered themselves for the provision of courier services falling under Sec 65 (105)(f) of the Finance Act, 1994; the respondent is engaged in delivering the courier parcels door-to-door; the charges for such courier delivery are either collected at the consignor's end 2 or at the consignee's end 3 ; in order to effect deliveries in the foreign destinations and in some Indian locations, the respondents seek the services of other courier agencies who are termed 'co-loaders' in the trade; different ways in which the activity of the respondent take place are as follows:
1Respondents 2 Prepaid 3 Cash on Delivery (COD) ST/50087/2017 Type of Place of Place of Collection of S.No. Remarks activity booking/ by delivery/ by charges by Outbound India Abroad (Foreign India
1. International (i) below (Respondent) co-loader) (Respondent) pre-paid Outbound India Abroad (Foreign Abroad (Foreign
2. International (ii) below (Respondent) co-loader) co-loader) post-paid Inbound Foreign co- India Co-loader (iii)
3. International loader (Respondent) abroad below Pre-paid Inbound Foreign co- India (iv)
4. International Respondent loader (Respondent) below COD India (other Domestic as co- India
5. domestic co- (v) below loader (Respondent) loaders)
(i) A portion of the charges collected from the consignor in India are paid by the Respondent to foreign co-loader. Revenue seeks to treat this amount as consideration towards the 'BAS' service received from the foreign co-loader and demands service tax on reverse charge mechanism.
(ii) Foreign co-loader collects the charges from the foreign consignee and pays a portion of it to the Respondents after retaining some amount. Revenue alleges that the Respondent receives the amounts towards 'BAS' rendered by the respondent to the foreign co-loaders and hence, taxable.
(iii) Foreign co-loader pays to the respondents, a part of the charges collected from the consignor in foreign destination for effecting delivery at the Indian destinations; the payment is in foreign exchange.
(iv) Respondents collect the charges from the domestic consignees and remit a part of it to the foreign co-loader after retaining a part of it.
(v) Revenue seeks to recover service tax on the amounts received by the Respondents from the domestic co-loaders.
2.1 Revenue seeks to recover service tax on:
(i) the remittances made by the respondents to their co-loaders located in foreign territories alleging that the respondents have availed the services of the foreign co-loaders under the category of 'BAS' and the same is recoverable under reverse charge mechanism.
(ii) the amounts received by the respondents from their co-loaders towards booking the international outbound parcels/consignments on COD basis alleging that the respondents have provided 'BAS' to their foreign co-
loaders.
ST/50087/2017
(iii) the amounts received from the other domestic couriers for rendering services to them in delivery of domestic consignments in the area of operation of the respondents.
(iv) the difference between gross amount recovered from the domestic co- loaders and FPSS/ST3 Returns.
2.2. Accordingly, a total of five show cause notices, covering period from 01.04.2006 to 31.03.2015, demanding a total service tax of Rs.15,34,06,634/-. The Adjudicating Authority, vide the impugned order, dropped the demands raised as at (i), (ii) & (iii) as above and confirmed the demand, as at (iv) above, of Rs.23,53,663/- and imposed a penalty of Rs.11,76,832/- under Section 78 of Finance Act, 1994 and also imposed penalty of Rs.5,000/- each under Sections 77(1) and 77(2) ibid.
2.3. Revenue is in Appeal against the impugned order submitting that the same is legally not tenable for the following reasons:
(i) Non-confirmation of service tax demands as well as consequent non-
imposition of commensurate penalty under section 78 of the Act on the issue of non-payment of service tax on foreign currency expenditure for import of Business Auxiliary Service from foreign counterparts/ co- loaders amounting to Rs.5,71,61,253/- for the period 2006-07 to 2010- 11 on Reverse Charge Mechanism.
(ii) Non-confirmation of service tax demands as well as consequent non- imposition of commensurate penalty under section 78 of the Act on the issue of non-payment of service tax on provision of co-loader services to domestic courier service providers amounting to Rs.1,87,01,472/- for the period 2006-07 to 2007-08 (up to 31.08.2007).
(iii) Non-imposition of penalty equal to hundred percent of the amount of service tax confirmed under section 78 of the Act.
3. Shri Sangeet Kumar Meena, Assistant Commissioner (AR) appearing for the Department reiterated the grounds of appeal and submits that as per CBEC Circular No. 96/7/2007-ST dated 23.08.2007 - that a sub-contractor is essentially a taxable service provider; the fact that the service provided by such sub-contractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor; accordingly, sub-contractor would also be liable to pay service tax. Learned AR submits that the concept of neutrality as advocated by the Adjudicating Authority does not conform to the provisions of the taxation statute; it cannot be applied in unwarranted situations; if applied without proper application the whole scheme of CENVAT credit will be defeated.
ST/50087/2017
4. Learned AR submits further that in terms of Section 78 of Finance Act 1994, the Adjudicating Authority is bound to impose 100% penalty. He relies on the case law of DTDC Courier Services [2012(26) STR 365 (Tri-Bang)] and Marshel [2015 (38) STR 843 (Tri-Mum)].
5. Shri Prabhat Kumar, Learned Counsel, for the respondent, submits that there is no Business Auxiliary services, rendered/received, as both Indian and Foreign courier companies are acting independently on principal to principal basis; moreover in terms of taxation of services (provided from outside India and received in India) Rules 2006 covers the situation and tax is not payable; The respondents are not clients of foreign counterparts and hence foreign courier company was also not providing any Business Auxiliary service to the Indian courier company; both the Indian and Foreign courier companies are service providers and the consumer of service are individuals located in India/abroad who send/receive parcels/packages. In respect of the amounts received, by the respondents from co-loaders located abroad, for the post -paid out bound parcels, the service is performed outside India. In respect of amounts paid by the respondents to foreign co-loaders, for the pre-paid outbound parcels, part of the service is rendered in India. Therefore, in both situations, they are not taxable at the hands of the respondent; the transactions satisfy the conditions of Rule 3(1)(ii) and Rule 3(2) of Export of Service Rules, 2005 and as the consideration was received in foreign exchange no service tax is payable.
6. Learned Counsel for the respondent further submits that in case of inbound pre-paid both the provider of service and the receiver of service were outside India and the respondent only acted as delivery agent and received the amounts in foreign exchange. He relies on Prakash Air Freight Private Vs. Commissioner of Service Tax [2008 (10) STR 308], United Business Xpress India Pvt Ltd., Vs. Commissioner of Service Tax, Delhi [2017 (48) STR 270 (Tri- Del)] and CBEC Clarification vide F.No. 341/43/96-TRU dated 31.10.1996. Learned Counsel also submits that the entire issue is revenue neutral and relies on the following:
a) Commissioner of Customs & Central Excise Vs. Textile Corporation Marathwada Ltd [2008 (231) ELT 195 (SC)]
b) Commissioner Vs. VE Commercial Vehicles Ltd [2019 (31) GSTL J96 (SC)]
c) VE Commercial Vehicles Ltd vs Commissioner of Central Excise & Service Tax, Indore [2018 (15) GSTL 291 (Tri-Del)]
d) Commissioner Vs. Mahindra & Mahindra Ltd [2019 (368) ELT A41 (SC)]
e) Mahindra & Mahindra Ltd Vs. Commissioner of Central Excise, Mumbai [2019 (368) ELT 105 (Tri-Mumbai)] ST/50087/2017
f) Hindustan Zinc Ltd Vs. Commissioner of CGST, Udaipur [2019 (370) ELT 1582 (Tri-Del)]
g) Commissioner of Central Excise & Customs, Vadodara Vs. Narmada Chematur Pharmaceuticals Ltd [2005 (179) ELT 276 (SC)]
h) Asmitha Microfin Ltd Vs. Commissioner of Customs, Central Excise & Service Tax, Hyderabad-III [2020 (33) GSTL 250 (Tri-Hyd)]
i) Jet Airways (India) Ltd Vs. Commissioner [2017 (7) GSTL J35 (SC)]
j) British Airways Vs. Commissioner of Central Excise (Adjn), Delhi [2014 (36) STR 598 (Tri-Del)]
7. Heard both sides and perused the records of the case.
8. A perusal of the impugned order indicates that the Commissioner holds that the respondents and the co-loaders abroad are working on a principal-to- principal basis; are not agents of each other and cannot be held to be the clients of each other. In respect of international outbound packages/parcels the entire amount has been collected by the respondents from the Indian consignors and the entire amount thus collected suffered service tax; therefore, no service tax can be demanded on the same service transaction under another service head as per section 65(A) of the Finance Act, 1994 and the CBEC Circular No. 51/13/2002 dt.17.01.2003; Commissioner holds that there can be no dispute regarding the premise that double taxation on any given transaction is not permitted unless and until specifically permitted by the Act. Commissioner further observes that the respondents could have paid the service tax only on such portion of the charges retained by them under 'Courier Agency service' and they could have paid service tax on the remaining portion shared with their foreign co-loaders under the head 'BAS'; as the service tax stands discharged on the total amount, the practice adopted by the respondents can at best be termed as accounting under wrong head. Placing reliance on the Hon'ble Supreme Court's decision in the case of Nirlon Ltd vs CCE [2015 (320) ELT 22 (SC)]; SRF Ltd [2016 (331) ELT A138 (SC)]; and British Airways Vs CCE (supra), Commissioner holds that the issue is revenue neutral and extended period also cannot be invoked. Commissioner further holds that the demand is not sustainable even for the normal period as the service rendered by the co- loaders would not fall under 'BAS' as there is no principal-agent or service provider-client relationship.
9. Further, in respect of outbound international post-paid delivery parcels, the Commissioner finds as follows:
"14.6.20 ............. the courier had to be delivered and used abroad; that in the light of Rule 3(1)(ii) of the Export of Service Rules, 2005, "used outside India" has to be considered harmoniously in order to avoid absurd interpretation; that the prime condition in order to constitute the courier service as Export of service is that it should partly be performed outside India;
ST/50087/2017 that the performance of the service was complete only when the courier was delivered outside India to the consignee and payment in respect of such service has been received in convertible foreign exchange; that the courier delivered outside India, obviously has to be used outside India only; that accordingly when the service is performed, delivered and used outside India, there cannot be any Service Tax liability in terms of Rule 4 as such a service is deemed to be exported; that thus, the contention in the SCNs that all the economic and commercial activities had taken place in India is not sustainable as the activities like use of courier service by consignee and payment in respect of such service is collected outside India in foreign exchange and that thus, it can be inferred that commercial and economic activities were partly performed outside India.
14.6.21 It has further been also submitted that this issue no longer res integra, as the same has been settled by catena of judgments of tribunals like TNT India Pvt Ltd [2007 (7) STR 142 (Tri-Bang)], wherein it was held that "the service provider and service recipient are in India is not relevant while considering whether there is export of service in the light of the deeming provision in Rule 3(2). All the other points, such as contractual relationship between service provider and service recipient, the status of the person receiving the courier, the fact that transportation is merely incidental in providing courier service are not at all relevant in the light of Rule 3(2). In our view, the clarification dated 3-10-2005 issued by the Ministry with regard to international courier agency is contrary to Rule 3(2) of Export Services Rules, 2005.........". Further, in case of Prakash Air Freight Pvt Ltd [2008 (10) STR 308 (Tri-Bang)], Professional Couriers [2008 (1)) STR 125 (Tri-Chennai), UB Xpress (South) Pvt Ltd [2008 (12) STR 152 (Tri-Chennai)] also the Hon‟ble Tribunal took the same view in an identical situation. It has been contended that as per the ratio laid down by the aforesaid judgments, when a taxable service was partly performed outside India, it shall be considered to have been performed outside India and that since in the instant case also all the conditions of Rule 3(1)(ii) read with Rule 3(2) of Export of Service Rules, 2005 are satisfied cumulatively, such services in Activity-II should be considered as export of services as per Export of Service Rules, 2005...."
10. We find that Commissioner comes to the conclusion that in respect of amount of money retained by the co-loader situated abroad out of the total amount of courier charges recovered from the consignee abroad, no service tax is leviable as the activity satisfies the criteria for being categorized as export of service in terms of Rule 3(2)(a). Commissioner follows the Circular F.No.14/10/2011-TRU dated 13.05.2011 and on the the ratio of the judgment in the case of SGS India Pvt Ltd [2011 (24) STR 60 (Tri-Mumbai)], Commissioner concludes that the benefit of the service accruing to the person residing abroad, the same needs to be treated as export of service.
11. On analysing the facts of the case and the decision of the Tribunal in the above cited cases, we find that the respondents and the foreign co-loaders have an arrangement to deliver the courier parcels emanating from the other on a principal to principal basis. There is no Business Auxiliary service/Business Support Service rendered to each other; there is no relationship of principal- agent or provider-client relationship. To this extent, the entire premise of the show cause notice that 'BAS' is either rendered or received by the respondent is ill founded. Therefore, the proposal, to confirm the demands under 'BAS', is not legally tenable. Even without going into other issues raised, it can be concluded that the show cause notice cannot survive. The ratio of the case laws relied ST/50087/2017 upon by the Revenue is also not acceptable in view of the above discussion. We find no reason whatsoever to interfere with the impugned order in this regard. Further, we find that the issue is no longer res integra, having been decided by the Principal Bench in the case of United Business Xpress India Pvt Ltd (supra), the Bench observed as under:
"4. Significant part of the demand pertains to the activity carried out by the appellant to other courier companies as co-loader. This involves providing the last leg service by supplying the courier packets to the recipient. They have also received consideration for this activity. The CBEC has clarified vide their circular dated 31.10.1996 that such services of a co-loader will not be covered under the category of courier service for levy of service tax. This is on account of the fact that the co-loaders do not provide any service to the customer, who gives the packets to the courier agencies for delivery to the ultimate recipient. The Department has now taken the view that such service is liable to service tax under the category of BAS. The view entertained by Revenue is that the activity amounts to providing courier service on behalf of the other courier agencies.
5. The provision of courier service involves collecting the goods from the person booking the consignment, transporting the same to the destination and ultimate delivery by hand to the recipient.
6. The consideration for the service also will be collected by the agency. In the present case, where the appellant has worked as co-loader their role is limited to delivery of the packets to the ultimate customer. For this activity, they have received consideration from the first courier agency. From the nature of the activity undertaken by the appellant, it cannot be said that they have carried out courier service on behalf of another. The production of goods on behalf of the client as envisaged under BAS has been clarified by CBEC in their letter F.No. 127/171/2007-CX4 dated 18.07.2007 as follows:
"3. ....Further, the activity also does not qualify to be called as provision of service on behalf of the client. This is because the taxable activity envisaged under this category of BAS is that while the „client‟ is obliged to provide some service to a third person but instead of the client providing such service, the service provider provides such service to the third person, on behalf of the client, i.e., acting as an agent of the client. Admittedly, in the present case, there is no third person. Thus, the activity so undertaken does not fall under BAS or any other existing taxable services."
7. The transaction between the appellant and the other courier agency is on principal to principal basis. It cannot be said that the service has been rendered on behalf of the courier agency. Consequently, activity cannot be covered under the definition of BAS and hence this part of the demand cannot be sustained."
12. Revenue submits that the adjudicating authority erred in not imposing penalty equal to the duty confirmed under Section 80 of the Finance Act, 1944. We find that the demand was raised on the basis of discrepancy, in the figures of payments, received by the respondent as co-loader for other courier agents, as reflected in Gross Receipts in accounts and ST-3 returns. We find that Commissioner finds as follows:
"14.10.3 However, from the discussions and findings above, it is clear that a gap existed in the consideration actually received for services as reflected in the balance sheet(s) for the period 2005-06 to 2009-10 and the consideration for services as reflected in the periodical service tax returns filed by the Noticee during the said period indicating a lower value on which service ST/50087/2017 tax liability was discharged. There is no denying the fact that the said facts came to notice only when the Audit was conducted. However, it is an admitted fact that all the transactions/receipts were recorded and declared in the balance sheet(s), there being no allegation to the contrary in the SCNs. As such I find that while there was a suppression of true value received for the taxable services provided by the Noticee during the period 01.10.2006 to 31.03.2010 leading to short-payment of service tax. As such I hold that penalty is imposable on the Noticee under the provisions of Section 78 of the Finance Act, 1994 though they qualify for benefit of only 50% penalty on the service tax not paid of Rs.23,53,663/- in terms of proviso to section 78 as it existed at the time of issue of demand i.e., 24.04.2012, since the receipts were part of the records."
13. We find that the show cause notice though invokes extended period of limitation, no wilful act on the part of the respondents to evade payment of duty has been alleged with evidence. The Revenue has not made out any case for suppression of fact, misstatement etc., with intent to evade payment of tax so as to impose penalty under Section 78. We find that the Commissioner erred in imposing 50% of the penalty without establishing suppression, mis- statement, fraud, collusion, etc., with intent to evade payment of service tax. Under the circumstances, confirmation of duty itself is not on a sound legal basis. Therefore, the request made by the revenue cannot be entertained. However, the respondents are not in appeal against the confirmation of duty and imposition of penalty equal to the 50% of the duty confirmed, setting aside the same is beyond the scope of present proceedings. Therefore, we find that the impugned order does not warrant any interference on the issue of either confirmation of the duty or on the issue of penalty imposed.
14. In view of the above, the Revenue appeal is rejected.
(Operative part of the Order was pronounced in the Open Court on) (JUSTICE DILIP GUPTA) PRESIDENT (P. ANJANI KUMAR) MEMBER (TECHNICAL) Veda