Custom, Excise & Service Tax Tribunal
Xpress India Pvt. Ltd vs C.S.T., Delhi on 21 November, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST BLOCK NO.2, R.K. PURAM, NEW DELHI 110 066. Date of Hearing/Order: 05.10.2016 Date of Pronouncement: _21.11.16 For Approval & Signature of : Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes Appeal No.ST/234/2010-CU[DB] [Arising out of Order-in-Original No.50/RDN/2009, dated 26.11.2009 passed by C.S.T., Delhi] M/s. United Business Xpress India Pvt. Ltd. Appellant Vs. C.S.T., Delhi Respondent
Appearance Mr. S.K. Pahwa, Advocate - For Appellant Ms. Neha Garg, DR - For Respondent CORAM: Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) Final Order No. 55160/2016, dated 21.11.16 Per Mr. V. Padmanabhan:
The present appeal is filed against the order of Commissioner of service Tax, New Delhi, dated 26.01.2011. In the said order, service to the extent of Rs.2,39,99,577/- stands confirmed against the appellant along with interest and penalties under Sections 77 and 78 of the Finance Act, 1994. The demand of service tax stands challenged in the present appeal. Appellant is a provider of service under the category of Courier Service falling under Section 65(33) of the Act. Service tax demanded in respect of co-loader services provided by the appellant to other courier service companies for delivery of domestic courier packets as well as imported courier packets. The service tax demand has been made under the category of Business Auxiliary Service (BAS) classified under Section 69(19) of the Act. The second part of the demand has been made on the consideration received by the appellant for packets booked for delivery to other countries on the ground that the activity did not belong to export of service since no foreign exchange was realised for these transactions by the appellant. The main grounds of appeal are as follows:-
(i) The activity carried out by them is by way of co-loader service to other courier agencies. They do not provide any service to the customer and deliver the courier packets received from other courier agency. Such activity has been clarified by the CBEC vide their circular dated 31.10.1996, as not covered under the category of Courier Service. The Department has now sought to charge tax on this activity under BAS and their submission is that they have undertaken the activity as co-loader on principal to principal basis for other courier agencies. It cannot be considered as a provision of Courier Service on behalf of their agencies.
(ii) Service tax demand has also been confirmed in respect of amounts received by them from abroad partly for delivery of incoming courier packets from abroad and partly by way of amounts received for courier consignments exported by them on collect basis. The demand is on the ground that the amount has not been received in convertible foreign exchange. Their submission is that the amount involved in these consignments have been realised by them from abroad by adjustment in foreign exchange against payments owed by tem to courier companies abroad. This is to be considered as receipt in foreign exchange. They have also enclosed certificate from the Chartered Accountant in this regard.
3. Heard Shri S.K. Pahwa, ld. advocate for the appellant and Ms. Neha Garg, ld. Departmental Representative for Revenue.
4. Significant part of the demand pertains to the activity carried out by the appellant to other courier companies as a 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 No.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 3rd person. Thus, the activity so undertaken does not fall under Business Auxiliary Service (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.
8. Now, we turn to the second part of the demand. The appellant has received certain amounts from abroad for delivery of incoming courier packets. They have also received some amounts for the courier consignments exported on collect basis. The claim of the appellant is that this amounts to export of service and hence no service tax is leviable. The demand for service tax has been made for the reason that the payment has not been received in convertible foreign exchange. We find from records that the amount has been received by the appellant by way of adjustment out of the amounts which they were liable to pay to the foreign courier companies as payment for courier packets exported for delivery in foreign destination. A copy of the certificate issued by the Chartered Accountant has been submitted by the appellant supporting the contention of the appellant.
9. The Notification No.21/2003-ST, dated 20.10.2003 exempts from payment of service tax, amounts received in convertible foreign exchange. We know that but for the amount due to be paid by the appellant to foreign courier companies, they would have received the considerations in foreign exchange for the service rendered by them to foreign courier companies for delivery in India. It cannot be said that on account of the adjustment, the consideration has not been received in foreign exchange. We are of the view that the condition of Notification No.21/2003-ST is to be considered as satisfied in the present case. Consequently this part of the service tax demand also merits to be set aside.
10. In line of the above discussion, the impugned order is set aside and the appeal is allowed.
[Pronounced in the Open Court on _________________] (Archana Wadhwa) Member (Judicial) (V. Padmanabhan) Member (Technical) SSK -2-