TMI Blog2018 (11) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... rom International Airport for delivery in foreign territory. Since Appellants have received the services from UPS Worldwide and the origin of the said services is within India, service tax required to be paid by UPS Worldwide is to be paid by the Appellant on reverse charge mechanism as provided for in Section 66A of Finance Act, 1994 read with rule 3(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - It is quite evident from the agreement that entire services provided by the appellant to UPS Worldwide for picking up the consignments in case of Export Freight Collect and for delivery in the case of Import pre paid have been provided in India. Since these services are provided in India, they are liable to service tax. Exemption from Tax - Export of services or not - Held that:- In view of the fact the no component of service has been provided by the appellant outside India, the services provided by them to UPS Worldwide cannot be termed as export of services, even if the payment against them are received in convertible foreign exchange. Thus exemption claimed by the appellant against provision of these services, by treating them as expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CN F No V/ST/HQ/AE/E/145/12 dated 23.10.2012 is dropped. 2.1 Appellants are engaged in rendering services falling under Courier Service , as defined under Section 65 (105) (f) read with Section 65 (33) of Chapter V of the Finance Act, 1994 and Intellectual Property Services as defined under Section 65 (105) (zzr) read with Section 65 (55a) and Section 65 (55b) of Chapter V of the Finance Act, 1994. 2.2 For export consignments they have appointed contractor i.e. M/s Transmodal, etc., to pick up the consignment from the door steps of consignor and deliver the same to their hubs. After segregating and consolidating the consignments and the documents, they hand it over to M/s UPS Worldwide Forwarding Inc, a foreign Company who undertakes the delivery of consignments right from picking up the export consignments at International Airports for delivering the same to the foreign consignee at its doorsteps across the world, with the help of a local UPS Courier Companies. For this appellants pay an agreed sum as consideration to M/s UPS Worldwide Forwarding Inc. In respect of such export consignments, there are two modes of payment available, i.e. payment by the consignor (freigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsignments, where assessee has rendered its services in India for foreign companies. 1430,51,57,299 156,75,63,518 4 Total 3433,86,14,777 377,50,32,770 2.5 Commissioner has adjudicated the case as per order referred in para 1 above. Aggrieved by the order, appellants have preferred this appeal before Tribunal. 3.1 Shri V S Nankani, Sr Advocate, appeared on behalf of the Appellant and Shri K M Mondal Special Counsel appeared for the revenue. 3.2 Arguing for the appellant learned Sr Counsel submitted: i. That for the person to be classified as Courier agency as defined in section 65(33), the service provider must satisfy following conditions:- a. It must be engaged in door to door transportation of time sensitive documents/ goods; b. For such door to door transportation, the service provider can utilize, directly or indirectly, the services of another person to carry the documents/ goods. ii. The word engaged in means that the service provider must have privity of contract with the person who agrees to pay the freight in consideration of service prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First mile Pickup Service provided by UPS India to UPS worldwide Courier Service Business Support Service 9.95 Import Freight Collect UPS India and Indian Consignee No Demand viii. Thus it is evident that where so ever appellants have entered into contract to provide services of door to door delivery they have paid the service tax on entire amount of freight collected. (Case of Export Prepaid and Import Collect) ix. Only the person who is engaged in providing the door to door delivery of goods/ documents can be levied to service tax under the category of Courier Agent. In the case of export prepaid they being the courier agent have paid the service tax on the entire freight collected by them. In this case the input services received by them cannot be classified as Courier Agent, as the service provider i.e. UPS Air renders the service of Air transportation, which at the relevant time was exempt from payment of service tax. Hence demand of ₹ 45.65 Crore made by classifying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e participants namely UPS Jet Air, UPS Worldwide and UPS Foreign Entity, who are entities of the Courier Agency. From the definition of Courier Agency it is quite evident that a courier agent can utilize the services of any other person directly or indirectly to carry such time sensitive documents, goods or articles. It is not material whether the whole activity is performed by one person or three persons as above. This will not change the essential character of the service. ii. In case of Vijayanand Roadlines [2006 (1) STR 113 (T)] it was held that door to door transportation cannot be given restricted meaning. Even the customer can come to the courier agent s office. This decision has been upheld in [2006 (4) STR J 115 (SC)] iii. Courier Service has essentially three components namely pickup, transportation and delivery. Courier Service is not fully performed till the delivery of goods/ documents to the consignee. Transportation is essentially a part of the courier service. iv. UPS Jetair has utilized the transport services provided by UPS Worldwide as per the International Transportation Services Agreement dated 30/10/2010. This does not imply that UPS Worldwide has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian airport and deliver the same to doorsteps of Indian Consignee with the help of another company like M/s Transmodal. For providing such services, they receive consideration from in convertible foreign exchange from UPS Worldwide. ix. In case of export Freight Collect basis, appellant s pickup the parcel from the doorstep of the Indian Consignor and thereafter transports and handover the same to UPS Worldwide at International Airport in India. The parcel is thereafter transported and delivered to the foreign consignee by the UPS Worldwide, who collect the freight from the consignee. In such cases also Appellants receive consideration from in convertible foreign exchange from UPS Worldwide. x. Appellants have claimed exemption from payment of service tax in both the above cases, claiming the services provided to be export of service. As per Rule 3(1) (ii) of the Export of Services Rules, 2005, to claim such exemption, services are required to be performed in India as well as outside India. Since none part of service is provided outside India the exemption claimed is not available to them. xi. Party has vide their letter dated 15.11.2013, themselves given the taxable val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery. Another notable aspect of the definition is the absence of words consignor and consignee from the said definition. In absence of the said words in the definition, it is immaterial whether the consignment being carried is handed over by the consignor for delivery to the consignee, or by any other person. The essence is that the person should be providing the service of transportation of time sensitive documents, goods or article, by accompanying the said time sensitive documents, goods or article, either himself or by employing the service of any other person. Thus if one courier agency books the consignment and hand over the same to another courier agency for further delivery, then both the persons are providing the courier agency service. In case of Vijayanand Roadlines [2006 (1) STR 113 (T-Bang)] it was held as follows: 5. In so far as the claim of the appellants for abatement of duty paid in respect of the customers having come and delivered the documents to their door and their contention that the same is not covered by the definition of Courier Service, is rejected. The definition of courier service in Para 27 of the Act read as follows: Courier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siting the documents and taking delivery of the same. This decision of Tribunal has been upheld by the Apex Court as reported in [2006 (4) STR J115 (SC)]. The crux of the said decision is that the phrase door to door do not restrict the scope of definition of the Courier Agency to the activity of person picking up the time sensitive documents and goods from the doorstep of consignor for delivery to the doorstep of consignee. The said phrase as used in the definition is to be read vis a vis the person providing the Courier Agency service. 6.1 In view of the above, we examine the terms of International Transportation Services Agreement dated 30/10/2010- UPS Jetair Express Pvt Ltd (referred to as the Contractor ) a company organized and existing under Companies Act of 1956 (the Act ) and having its registered office at Comtrade Centre, Cambatta Building. J Tata Road Mumbai -400020 India, and, UPS worldwide Forwarding INC (referred to as UPS ) a corporation organized under the laws of State of Delaware, United State of America, and having its principle place of business at No 55 Glentake Parkway N E Atlanta, Georgia 30328, United State of America. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forth in the ISPS Shipment Manual , the IOPS Manual and the UPS Service Guide (as amended from time to time), copies of which UPS shall provide the Contractor. 2.2 The Contractor shall calculate the dimensional weight of the package in accordance with the procedure set forth in the attached Exhibit C. To ensure proper processing, the Contractor shall specify the dimensional weight on the waybill prior to export of each consignment. UPS shall audit shipments for dimensional weight to ensure the Contractor s compliance with the procedure set forth in attached Exhibit C. Should there be any discrepancy between the actual dimensional weight and that specified in the waybill, the Contractor shall be held responsible for said discrepancy. In this regard, the Contractor shall be charged for the discrepancy within thirty (30) days based on the net settlement invoice. In addition, UPS shall also charge the Contractor a surcharge of five U.S. dollars (U.S. $ 5.00) as processing fee for each shipment discrepancy. 2.3 For services rendered by UPS, the Contractor shall pay for the compensation in accordance with the attached Exhibit B. UPS shall provide the pertinent net settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consignor for delivery to the UPS, at International Airport. iii. On the Airway bill, appellant is indicated as shipper instead of the consignor. Thus from the documents prepared also it is quite evident that for the carriage of the said parcel, UPS Worldwide has acted as courier agency for carriage of the said parcel from the international Airport in India for delivery to the consignee. b. Import Pre Paid Sample i. Document for the transportation of the parcel is generated online and the Shipper is required to acknowledge the agreement with UPS. ii. UPS foreign entity picks up the shipment from the premises of consignor for delivery to airlines arranged by UPS WWF for delivery to International Airport in India. iii. Appellants inform the consignee on receipt of cargo arrival notice, and pick up the parcel from the International Airport for delivery to the consignee after billing him for delivery order fees for release of the said consignment and payment of requisite taxes. In this case appellants have provided the courier agency service to UPS Worldwide for delivery of the said consignment from the International Airport to premises of consignee. They have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of discussions as above we are of the view that in case of Export Pre-paid, where the consignments are booked by the Appellant for delivery in for territory appellants receive the services from UPS Worldwide for picking up the said consignments from International Airport for delivery in foreign territory. Since Appellants have received the services from UPS Worldwide and the origin of the said services is within India, service tax required to be paid by UPS Worldwide is to be paid by the Appellant on reverse charge mechanism as provided for in Section 66A of Finance Act, 1994 read with rule 3(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. For ease of reference the said provisions are reproduced below: Section 66A of the Finance Act, 1994 66A. (1) Where any service specified in clause (105) of section 65 is,- (a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze), (zzzf), and (zzzp) 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) specified in clause (105) of section 65 of the Act, but excluding (a) sub-clauses (zzzo) and (zzzv); (b) those specified in clause (i) of this rule except when the provision of taxable services specified in clauses (d), (zzzc), and (zzzr) does not relate to immovable property; and (c) those specified in clause (ii) of this rule, be such services as are received by a recipient located in India for use in relation to business or commerce. 6.8 It is quite evident from the agreement that entire services provided by the appellant to UPS Worldwide for picking up the consignments in case of Export Freight Collect and for delivery in the case of Import pre paid have been provided in India. Since these services are provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gency service defined under Section 65(105)(f), and specified by the Rule 3(1)(ii). Thus in view of the fact the no component of service has been provided by the appellant outside India, the services provided by them to UPS Worldwide cannot be termed as export of services, even if the payment against them are received in convertible foreign exchange. Thus exemption claimed by the appellant against provision of these services, by treating them as export of service is not admissible. 7.1 Now coming to the issue of limitation. Counsel for appellant has vehemently argued stating that audit of their records for the period 2005 to 2009 was undertaken on 8th February 2010. During the course of audit all the facts and financials were disclosed to the audit officers hence department is not justified in invoking extended period of limitation as provided by proviso to Section 73(1) for making the demands. On the contrary learned Special Counsel appearing on behalf of revenue submitted that audit was limited to CENVAT account. Further appellants had not disclosed the relevant facts to the department on their ST-3 return. Thus by not disclosing the relevant details in the ST-3 returns appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was operating under self-assessment procedure during the impugned period. The appellant has failed to declare in the said return the complete particulars with regard to the services rendered to the foreign advertisers. Therefore, the ratio of the decision of the Hon ble Apex Court in the case of Madras Petrochem Ltd. (supra) relied upon by Revenue would squarely apply. In the said decision, the Hon ble Apex Court had held as follows:- 14. The proposition of law as laid down is not in dispute. We find in the present case as aforesaid, a clear finding was recorded that the petitioner was aware and was obliged to file RG 1 Register, gate passes and also of clearances in the RT 12 returns by disclosing the particulars which was not done in the present case. The finding recorded in this case, especially in the background that this was a case of self-removal procedure in which there is obligation cast on the assessee to make proper and correct declaration and entries in the production register RG 1. Further finding was that it was not by inadvertence. There could be no other inference if it was not by inadvertence, then deliberate, then it is not in the realm of inaction of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding of the Commissioner (Appeals). 7.4 In case of Pasupati Spinning and Weaving Mills [2015 (318) ELT 623 (SC)], Hon ble Apex Court has held as follows: ..Equally, we do not think that there is any ground for interference on the extended period of limitation being applicable inasmuch as CESTAT is again correct in saying that as the declaration and RT-12 returns being vital documents submitted by the respondent (appellant herein) did not mention the vital word hanks , they suppressed a material fact which, to their knowledge, would not bring their sewing thread within the exemption Notification. For all these reasons, we find no merit in these appeals. The appeals are, accordingly, dismissed, without any order as to costs. 7.5 Hon ble Supreme Court has in case of Madras Petrochem {1999 (108) ELT 611 (SC)] held as follows: 9. The contention for the revenue is that under the self removal procedure, the primary obligation of an assessee is to make proper declarations and entries in the production Register RG 1, the gate passes and RT 12 returns unlike in the Physical Control System where the Excise Inspector present in the factory has to duty of completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise was required before the assessee could be saddled with any liability beyond the period of six months. 12. Learned Counsel further referred to the decision of this Court in the case of Collector of Central Excise, Hyderabad v. M/s. Chemphar Drugs Liniments, Hyderabad [1989 (40) E.L.T. 276 (S.C.) = 1989 (2) SCC 127], which has also been referred in the aforesaid decision. 13. Another submission is with reference to the decision in the case of J.K. Cotton Spinning Weaving Mills Ltd. v. Collector of Central Excise [1998 (99) E.L.T. 8 (S.C.) = 1998 (3) SCC 540] that this proviso should be strictly construed. It was held that the proviso to Section 11A of Central Excises and Salt Act permitting the extension time should not be stretched more than the elasticity supplied in the section itself. So, the eventuality envisaged in Section 11A for further lengthening of the limitation period must be strictly construed. 14. The proposition of law as laid down is not in dispute. We find in the present case as aforesaid, a clear finding was recorded that the petitioner was aware and was obliged to file RG 1 Register, gate passes and also of clearances in the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined : Provided that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, for the purposes of this section, the duty as reduced or increased, as the case may be, shall be taken into account. 6. On the basis of the aforesaid language in the Section, the submission of Mr. Radhakrishnan is meritorious. Thus, while the penalty as demanded in respect of one Show Cause Notice had been quashed, the Tribunal could not reduce it for an amount lesser than the duty which has been upheld. The duty in respect of two demands comes to ₹ 40,44,720/-. Therefore, going by the provisions of Section 11AC of the Act, the penalty should also have been ₹ 40,44,720/- and not ₹ 20 lakhs. 9.2 In case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] Hon ble Apex Court has held that once it is found that ingredients for invocation of section 11AC exist then tribunal do not have any jurisdiction to reduce the quantum of penalty. The relevant excerpts are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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