TMI Blog2023 (8) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. However, while examining these invoices during the hearing, they were found to contain both types of invoices - None of the invoices showed bulk booking of space with the shipping lines / airlines by the appellant which was then farmed out to needy customers. Considering that these were sanitised invoices chosen by the appellant and not randomly chosen invoices by Revenue, the invoices presented during the hearing did not reveal a clear or pre-dominant pattern of advance booking of cargo space. The appellant whose activity has failed to establish his credential as a Freight Forwarder is found to satisfy the classification of Business Support Service. The appellant s averment during the hearing was that what they receive towards freight charges from the service recipients is a reimbursement of freight charges with a slight markup and subjecting it to tax would amount to double taxation - HELD THAT:- The judgement of the Hon ble High Court of Delhi in the case of Intercontinental Consultants [ 2012 (12) TMI 150 - DELHI HIGH COURT ], has now been affirmed by the Apex Court in Union of India v. M/s. Intercontinental Consultants [ 2018 (3) TMI 357 - SUPREME COURT ], whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to section 73(1) of the act was rightly invoked. The lack of discussion and finding that there was suppression of fact or contravention of any of the provisions of the chapter or of the rules made thereunder with intent to evade payment of service tax, is fatal and hence we find that the evocation of the extended period has not been correctly done. In the circumstances the demand is to be restricted to the normal period only as the ingredients to evoke proviso to section 73(1) was not demonstrated to be present as per both the orders mentioned. Penalties imposed, which are consequential to evoking of the extended period, are also set aside. The issue regarding the value of the taxable service for the normal period is remanded and shall be redetermined along with duty and interest by the Original Authority - Appeal disposed off. - Hon ble Shri P. Dinesha, Member (Judicial) And Hon ble Shri M. Ajit Kumar, Member (Technical) Shri S. Adithya, Chartered Accountant for the Appellant Shri Rudra Pratap Singh, ADC (AR) for the Respondent ORDER Per M. Ajit Kumar, These two appeals arise out of Order in Appeal No. 31/2017 (CTA-I) dated 27.7.2017 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant who is entirely responsible for safe shipment of goods handed over by the exporter. During the process of booking cargo space, appellant negotiate the price for such cargo space and the appellant is free to add mark up to such freight as per prevailing market conditions. Hence it is clear that the appellant is acting on a principal-to-principal basis and therefore has to be treated on par with a transport of goods. The fact that the appellant has negotiated the freight charges with the airline / shipping and the fact that they have acted as a principal has not been disputed anywhere in the Order in Appeal or Order in Original. In fact, in para-No. 20 of the Order in Original, the adjudicating authority has provided a clear finding that the appellant is acting in the capacity of a principal and are squarely covered by Circular No. 197/7/2016-ST dated 12.8.2016. Having concluded that the appellant has acted in the capacity of a principal (as per para No. 20 of the Order in Original), department cannot seek to levy service tax by classifying it under Business Support Service. The Education Guide brought out by CBIC has pointed out that when a freight forwarder buys and sells ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his Appeal Paper Book the appellant refers to an Education Guide issued by CBEC and have stated to have reproduced verbatim the clarification provided. But the passage is found missing nor was a copy of the Guide enclosed. f) The appellant has not submitted invoices pertaining to the impugned periods, which were issued to the shipping lines / airlines as well as to their customers / clients (i.e. Exporters / Importers), in assertion of their stand, during the adjudication process and the current Appeal proceedings. Nor has the appellant submitted any set of Two Paired Invoices which would help verify the fact that they had first booked the cargo space with the shipping line / airlines and thereafter billed it to their would be prospective customers / clients (i.e. Exporters / Importers) . i.e. a copy of Invoice for purchasing (booking) of cargo space with the shipping lines / airlines containing the date of X and the corresponding copy of the selling Invoice of Cargo Space to their would be prospective customer / client (i.e. Exporter / Importer) with the mentioning of the date of X + 1 day or further subsequent days , which could verify beyond doubt that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them and the shipping lines / airlines have not been provided. The appellants have however clarified that they have not submitted the same as no such agreements existed. They have also filed a set of few invoices during the hearing after Revenue had pointed out the lack of the same to substantiate their assertions. However, while examining these invoices during the hearing, they were found to contain both types of invoices. (i) where the space was pre booked from the shipping lines / airlines and (ii) where the requirements of clients were received first and then space booked with shipping lines / airlines. None of the invoices showed bulk booking of space with the shipping lines / airlines by the appellant which was then farmed out to needy customers. Considering that these were sanitised invoices chosen by the appellant and not randomly chosen invoices by Revenue, the invoices presented during the hearing did not reveal a clear or pre-dominant pattern of advance booking of cargo space. Issue in Dispute 7. The six grounds of appeal taken up by the appellant are as under; i) Clarification contained in the CBEC Circular dated 12/08/2016 applies to the appellant s case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the land which are agreed to be severed before sale or under the contract of sale . Similar such definitions are attributed to goods under various Sales Tax Acts in India. Section 65(50) of the Finance Act, 1994 also defines the Goods as per the meaning assigned to in clause (7) of section 2 of the Sale of Goods Act, 1930. In view of the above statutory provisions, what requires to be ascertained is whether space on vessel to accommodate goods under export which is claimed to be subject of sale can be treated as goods? 15.2 The Constitutional Bench of the Hon'ble Supreme Court in the case of Tata Consultancy Services vs. State of Andhra Pradesh 2004 (178) ELT 22 (SC) was examining the case as to whether canned software was goods under the provisions of the Andhra Pradesh General Sales Tax Act, 1975 and held as below- 73. The software marketed by the Appellants herein indisputably is canned software and, thus, as would appear from the discussions made hereinbefore, would be exigible to sales tax. 74. It is not in dispute that when a programme is created it is necessary to encode it, upload the same and thereafter unloaded. Indian law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of being transmitted, transferred, delivered, stored and possessed. If a software whether customized or non-customised satisfies these attributes, the same would be goods . This in our opinion, is the correct approach to the question as to what are goods for the purposes of sales tax. We respectfully adopt the same. 48. What are the goods in a sales transaction, therefore, remains primarily a matter of contract and intention. The seller and such purchaser would have to be ad idem as to the subject matter of sale or purchase. The Court would have to arrive at the conclusion as to what the parties had intended when they entered into a particular transaction of sale, as being the subject matter of sale or purchase. In arriving at a conclusion the Court would have to approach the matter from the point of view of a reasonable person of average intelligence. We find that the above discussion in the impugned order correctly concludes that there is no sale involved in terms of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct freight charges incurred by the assessee, as the freight charges are not negotiated by the assessee with the express knowledge of the customers. Though, the assessee bills their customers with various charges viz. freight charges, LCL charges, delivery order charges, documentation charges, BL fees, Terminal Handling charges etc. service tax is discharged by the assessee on all charges except freight charges (Ocean / air freight). 9.1 We find that this is a case in which the appellant has taken registration under the Category of Business Auxiliary Services (BAS) and Business Support Services (BSS), they have not taken a registration under the category of Freight Forwarder until they were issued a SCN by the department. It is the general rule in legal proceedings, that he who asserts must prove. From the above description of the appellant s activities it is seen that there are two independent services rendered, as the appellant is not a pure agent acting on behalf of the shipping lines/ airlines. The first is between the appellant and the shipping line/ airline and the second between the appellant and their customer/ importer/ exporter. To differentiate whether the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant has not been able to establish their case as a Freight Forwarder based on documentary evidence. 9.2 At para 5 above Revenue has submitted nine major activities undertaken by Freight Forwarders as per trade parlance. However, in the absence of documentary evidence and demonstrable facts the appellant has not listed out the activities undertaken by them, which could be compared with the trade practice. They have mainly based their arguments on Boards Circular No. 197/7/2016 ST, dated 12/08/2016, issued from F. No. 137/54/2016-Service Tax-Part-I. They have also referred to an Educational Guide of CBEC but no copy or extract of the same was provided. In any case Boards Circular s / Guide s are not binding on the Tribunal. However, the relevant part of the circular dated 12/08/2016 which was provided by the appellant, is extracted below. 2.0 It may be noted that in terms of rule 10 of the Place of Provision of Services Rules 2012, (herein after referred to as POPS Rules 2012 , for brevity) the place of provision of the service of transportation of goods by air/sea, other than by mail or courier, is the destination of the goods. It follows that the place of provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortation of the goods and undertakes all the attendant risks, he is providing the service of transportation of goods, from a place in India to a place outside India. He is bearing all the risks and liability for transportation. In such cases they are not covered under the category of intermediary, which by definition excludes a person who provides a service on his account. 3.0 It follows therefore that a freight forwarder, when acting as a principal, will not be liable to pay service tax when the destination of the goods is from a place in India to a place outside India. 4.0 Keeping this in mind, field formations may deal with cases purely on the basis of the facts of the case, the terms of contract between the entities concerned, the provisions of the Finance Act, 1994, the POPS Rules 2012 and other rules. 9.3 The appellant bases his whole arguments as per para 2.2 of the above circular. They state that when the Freight Forwarder provides service of transportation of goods to a place outside India then they have acted in the capacity of a principal and Rule 10 of the Place of Provision of Service Rules 2012 would be applicable. We find that these issues relate to qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e booking in advance and transportation along with responsibility for the cargo, but only to provide service in a market where customers have limited knowledge of market conditions. Having not being able to establish their activities in terms of the requirements of para 4.0 of the circular, it cannot be said that they act as a principal in terms of para 2.2 ibid. An activity built only on the foundation of words and statements is a poor substitute for documented proof. 9.4 We find that the impugned order has examined the activities of the appellant as a Business Support Service. Para 6 and 7 of the impugned order is reproduced below; 6. In the connection, in order to arrive at a conclusion as to whether the said activities are covered under Business Support Service, it is necessary to go through the definition of Business Support Service as defined at Section 65(104c) of the Act which is extracted as under:- Support Services of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Pvt Ltd Vs Commissioner of Servive Tax, Hyderabad ST [2019-TIOL-1260-CESTAT-HYD] f) La Freight Vs. CCE ST Final Order No. 40464 to 40467 of 2018 g) Phoenix International Freight Services Pvt Ltd vs Commissioner of Service Tax, Mumbai II [2016-TIOL-2353-CESTAT-Mum] The appellant s averment during the hearing was that what they receive towards freight charges from the service recipients is a reimbursement of freight charges with a slight markup and subjecting it to tax would amount to double taxation. They have stated that the judgement of the Hon ble High Court of Delhi in the case of Intercontinental Consultants , has now been affirmed by the Apex Court in Union of India v. M/s. Intercontinental Consultants (supra), which settles the matter on reimbursements. We find that the Hon ble High Court of Delhi, had declared Rule 5(1) of the Service Tax Valuation Rules as ultra vires of the erstwhile Section 66 and Section 67 of the Finance Act, 1994. The Apex Court while affirming the judgement of the Delhi High Court as per the statute then in force held that service tax is collected with reference to the value of service. As a necessary corollary, it is the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service to any person shall pay Service Tax at the rate specified. Therefore, in the absence of any exemption granted, a sub-contractor has to discharge the tax liability. The service recipient i.e. the main contractor can, however, avail the benefit of the provisions of the Cenvat Rules. When such a mechanism has been provided under the Act and the Rules framed thereunder, there is no reason as to why a sub-contractor should not pay Service Tax merely because the main contractor has discharged the tax liability. As noticed above, there can be no possibility of double taxation because the Cenvat Rules allow a provider of output service to take credit of the Service Tax paid at the preceding stage. (emphasis added) This later development in law also needs the consideration of the Original Authority. 10.2 The judgments from 9(b) to (g) relate to different category service providers. What however is common is that the appellant in those cases received consideration for full freight from their customers / exporters and the difference between the amount paid by them to shipping lines / airlines and that collected from his customers / exporters etc. left a surplus that was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service tax. The order is non-speaking in this regard. The discussion is confined to a few lines at para 28.0 and 29.0 which is reproduced below:- 28. In view of the fact that the assessee did not declare said taxable value and for not assessing the same to the service tax correctly, invocation of extended period under proviso to section 73(1) of Finance Act, 1994 is justified. 29. In view of the above discussion, the proposal to demand service tax under present SCN by invoking proviso to section 73(1) supra requires confirmation along with confirmation of interest as applicable under section 75 supra. We find that the impugned order passed by the learned Commissioner (Appeals) is also not very helpful in this matter and merely states that the appellant did not declare said taxable value and assessed the service tax correctly, hence extended period under proviso to section 73(1) of the act was rightly invoked. Relevant portion of OIA is reproduced below; The appellant also put forward a plea on limitation. In the instant case, the facts came to light only upon audit of accounts by the Audit Group of the erstwhile Service Tax Commissionerate I which otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
