2017 (1) TMI 1824 - AT - Service Tax

Classification of services - Business Auxiliary Services or Courier Service? - consideration received by the appellant for co-loading service for business associates/franchise in connection with delivery of consignments - HELD THAT - The findings of the Original Authority regarding tax liability of the appellant under Business Auxiliary Services is devoid of any legal merit. He mentioned the clarification dated 31.10.1996 is for Courier Services. Business Auxiliary Services was brought to tax net thereafter only and hence the appellants are liable to tax. The Original Authority failed in giving reasons as to what type of service has been rendered by the appellant to service recipient on behalf of the client. As per the details available and the submissions made by the appellant it is clear that appellants have arrangements with other Courier Agencies to help them out in transport and delivery of articles goods etc. The appellant is not dealing with any customer directly and receiving any consideration from the customer. In fact the arrangement between the appellants and other Courier Agencies is two party arrangements with no role for the customer in such arrangement. There are no merit in the impugned order and accordingly same is set aside - appeal allowed.

Summary

Issues:
Tax liability on co-loading service under Business Auxiliary Services.

Analysis:
The appeal in question involves a dispute regarding the tax liability of the appellant, engaged in providing taxable services under the category of Courier Service, for co-loading services provided to business associates/franchises. The Revenue contended that the consideration received for co-loading services is taxable under "Business Auxiliary Services" as it falls under the provision of service on behalf of the client. The impugned order confirmed a service tax liability of Rs. 63,90,956/- along with penalties imposed under various sections of the Finance Act, 1994.

The appellant argued that prior to 16.05.2008, the definition of "Courier Agency" only applied to services provided to customers directly by Courier Agencies. However, post the amendment on 16.05.2008, co-loading services provided to other Courier Agencies also became taxable. The appellant relied on a clarification issued by the Board in 1996, stating that co-loaders do not provide services directly to customers but to other Courier Agencies, thereby absolving them of service tax liability. The appellant contended that they do not provide services on behalf of any client, as their arrangements with other Courier Agencies do not involve direct dealings with customers.

The Revenue, on the other hand, supported the findings of the Original Authority, maintaining that the tax liability on the appellant was correctly upheld. However, upon hearing both sides and examining the appeal records, the Tribunal found that the Original Authority's classification of the appellant's services under Business Auxiliary Services lacked legal merit. The Tribunal noted that the appellant's arrangements with other Courier Agencies did not involve direct interaction with customers, and the services provided did not fall under the category of service on behalf of the client. The Tribunal emphasized that the appellant's role was limited to assisting other Courier Agencies in the transport and delivery of goods, with no direct involvement or consideration received from customers. Consequently, the Tribunal set aside the impugned order, finding no merit in the tax liability imposed on the appellant.

In conclusion, the Tribunal allowed the appeal, highlighting that the appellant's services did not align with the criteria for taxation under Business Auxiliary Services. The judgment, delivered on 04.01.2017 by the Appellate Tribunal CESTAT New Delhi, clarified the nature of the appellant's services and absolved them of the tax liability imposed by the Revenue, emphasizing the absence of direct service provision to customers on behalf of clients.