9911796707
TMI Blog2016 (9) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... r-se services providers in the following manner. Outbound Shipments Stage Service Provider engaged by the Applicant Local Transportation in India by road Goods Transport Agency Loading/Unloading in India Applicant Customs Clearance in India Customs House Agent Air/Ocean Freight IATA member Airline Loading/Unloading abroad Freight Partner Customs Clearance abroad Freight Partner Local Transportation abroad Freight Partner Inbound Shipments Stage Service Provider engaged by the Applicant Local Transportation abroad Freight Partner Loading/Unloading abroad Freight Partner Customs Clearance abroad Freight Partner Air/Ocean Freight Freight Partner Loading/Unloading in India Applicant Customs Clearance in India Customs House Agent Local Transportation in India by road Goods Transport Agency 2. Applicant shall contract with an IATA member airline for transportation of consignment; the airline shall issue an Airway Bill (Awb) to the applicant. Awb shall govern the terms of contract for transportation of cargo between the airline and the applicant on a principal to principal basis. Further, applicant shall not contract with the airline as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds transport agency, custom house agents, airlines etc. and negotiate their charges for the consignment proposed to be undertaken. Applicant shall then communicate the fee quote to its customer, with charges for each and every activity undertaken by the applicant specifically bifurcated. Further, the applicant"s customer shall have no right over the disposition of the right to avail service procured by the applicant from the particular service provider. Applicant shall be separately and legally bound to conduct the carriage of the customer"s cargo in terms of its own contract with the customer. Applicant intends to discharge its service tax liability under the Finance Act, 1994 for each and every activity in provision of services to the customer separately as an unbundled service as they are separate services, to be sold individually. Applicant further submits that commercially, the earning of the applicant for all the services rendered shall be the differential between the fee charged from the customer and the charges paid to subcontractors. In case of international freight, the differential amount being the freight margin. Therefore, there may be situations wherein the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 9 of POP Rules; that the Service Tax is liable to be paid on the commission or margin earned by the applicant in view of Rule 9 of POP Rules. Further, the actual amount of freight for transportation of goods by air cargo or a vessel from a place outside India up-to the customs station of clearance in India falls under the Negative List of Service specified under Section 66 D and hence, not subjected to levy of Service Tax. Revenue further states that the international freight in respect of export of goods is exempted from levy of Service Tax; that if any margin is earned by the applicant by providing services as intermediary, Service Tax is leviable on the amount earned as commission or margin. In short, Revenue has raised 2 issues in respect of subject application, both in respect of inbound shipment and outbound shipment. First is that freight margin recovered by the applicant from the customers is in respect of intermediary service in terms of Rule 9 (c) of POP Rules and therefore, place of provision of service shall be location of service receiver. Second issue is that the service provided by the applicant is single indivisible bundled service in terms of Section 66F of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modified by his contract with the customer. In particular, he is accountable to him, but, as will be seen, this duty is usually qualified by the trading conditions of the forwarder. If the forwarder acts as a principal, he enters into a contract of services with the customer. He is the only person with whom the customer is in contractual relations, even though the actual services which the forwarder has undertaken are carried out by others. The profit which the forwarder makes, when contracting with the actual operators, is his own affair and he is not accountable for it to the customer. 9. In the case before us, applicant would enter into an agreement with the carrier for transportation of cargo i.e. airline/shipping line. This service agreement would be on principal to principal basis and not as agent of said airline/shipping line. Therefore, applicant would be covered by the exclusion clause i.e. provides the main service- inbound and outbound shipment on his own account in terms of Rule 2(f) of POP Rules and thus not covered under Rule 9 ( c) ibid as "intermediary" service. Therefore, place of provision of said service will not be location of service provider. 10. Revenue su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place of destination of the goods, as per Rule 10 of POP Rules. In the case of outbound shipment -both by aircraft and vessel, destination of goods shall be outside India. Therefore, place of provision of service of outbound shipment shall be outside India, hence there will be no Service Tax on freight margin recovered by the applicant from the customer. 13. As far as inbound shipment is concerned, it is noticed that Section 66 D (p) (ii) of Finance Act, 1994, as it existed prior to 01/06/2016 read as under: 66 D Negative list of services The negative list shall comprise of the following services, namely:- (p) services by way of transportation of goods - (ii) by an aircraft or a vessel from a place outside India to the customs station of clearance in India; 14. In view of said Section 66 D (p) (ii), transportation goods by aircraft or vessel from a place outside India to India prior to 01.06.2016 shall be covered by the negative list of services and shall not be liable to Service Tax, as per Section 66 B ibid. 15. With effect from 01.06.2016, aforesaid section 66 D (p) (ii) of the Finance Act, 1994 has been omitted vide the Finance Act, 2016 of 2016. Therefore, services ..... X X X X Extracts X X X X X X X X Extracts X X X X
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