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PM-STIAC discusses accelerating Industry-Academia Partnership for Research and InnovationIndia, Singapore hold dialogue over cyber policy44 bids received under 10th Round of Commercial Coal Mine AuctionsCops arrest former Dy PM of Nepal in cooperative fraud casePuri highlights India's Petrochemical potential at India Chem 2024UN reports record high cocaine production in ColombiaMinister unveils 'Aviation Park' showcasing India's Aviation HeritageED finds PFI wanted to start Islamic movement in IndiaBlocking Credit - Rule 86ASEBI says investors can use 3-in-1 accounts to apply online for securitiesI-T- Penalty u/s 271(1)(b) need not be imposed when assessee moved an adjournment application & later complied with notice u/s 142(1): ITAT4 Kanwariyas killed as vehicle runs over them in Banka, BiharI-T- Accounting principles do not prescribe maintaining of a day-to-day stock register, and the books of accounts cannot be rejected on this basis alone: ITATUN food looted and diverted to army in EthiopiaCus - Alleged breach of conditions for operating public bonded warehouse; CESTAT rightly rejected allegations, having found no evidence of any such breach: HCUS budget deficit surges beyond USD 1.8 trillionST - Onus for proving admissibility of Cenvat Credit rests with service provider under Rule 9(6) of the Cenvat Credit Rules, 2004: CESTATIf China goes into Taiwan, Trump promises to impose additional tariffsRussians love Indian films; Putin lauds BollywoodCus - Classification of goods is to be determined in accordance with Customs Tariff Act & General Interpretative Rules; Country-of-Origin Certificate may offer some guidance, but cannot solely dictate classification: CESTATCus - Benefit of such Country-of-Origin certificates cannot be denied if all relevant conditions are met under the applicable Customs Tariff rules: CESTATCuban power grid collapses; Country plunges into darknessCus - As per trite law, merely claiming a classification or exemption does not constitute mis-declaration or suppression - any misclassification does not equate to willful intent to evade duty: CESTATKarnataka mulling over 2% fee on aggregator platforms to bankroll gig worker welfare fundCus - Extended limitation cannot be invoked in case of assessee who is a regular importer with a consistent classification approach: CESTAT
 
ST - High Sea sale - trade margin charged to customers is subject to customs duty - If that be so, there is no reason why same part of transaction value should be taken out of customs transaction and subjected to ST under guise of BAS - Stay granted: CESTAT

By TIOL News Service

MUMBAI, AUG 26, 2013: THE appellants are engaged in trading of various commodities such as edible oils, petroleum products, gold, silver, groceries etc. They undertake import as well as export of these items on behalf of various traders/merchants. In case of an import transaction, they undertake the imports by placing order on the foreign suppliers, opening LC and the goods are purchased on their own account and when the goods arrive in India, they sell these goods to the customers on High Seas Sale basis and they charge a mark-up ranging from 1% to 1.5% of the value of the goods. The documents for import of the items are filed by the respective customers, who declare the value inclusive of the mark-up for the purposes of customs duty assessment.

The Revenue was of the view that the applicants are rendering services of import and export to the customers and, therefore, they are liable to Service Tax under the category of “Business Auxiliary Services”.

Accordingly, the demand noticees were issued on high seas and the appellant was at sea with Service Tax demands aggregating Rs.16.54 crores along with interest and penal consequences.

Before the CESTAT the appellant filed a Miscellaneous application for filing additional grounds and production of certain documents relating to the sales transactions; a COD application seeking condonation of delay of 26 days which occurred as they were asked to file separate appeals instead of a composite appeal [which was filed in time] and Stay applications along with the appeal.

The Bench observed that the Misc. application for filing additional grounds could be taken up at the time of final hearing of the appeal and the COD application was allowed considering the reasons given for the delay.

In the matter of seeking Stay, the appellant submitted –

+ The transaction is on principal to principal basis and is a simple trading transaction. Further, the mark-ups added by them on their purchase price is already subject to Customs duty and hence, Service Tax is not to be leviable on the transaction of trading as the transaction is one of sale and not of service.

+ Reliance is also placed on the Board Circular no. 32/2004-Cus dated 11.05.2004 titled "Customs Valuation Rules, 1988 - Determination of assessable value for goods sold on high seas - reg." to submit that the transaction is one of import and their trade margin is included in the taxable value for the purposes of assessment of customs duty.

+ The stay ordered by the CESTAT in the case of Indian Oil Co. Ltd. (2012-TIOL-180-CESTAT-MUM) is relied upon where in a similar situation, it was held that transaction is one of the Sale and Service Tax liability is not attracted and accordingly waiver from pre-deposit of the dues adjudged was granted.

The Revenue representative submitted that the transaction of “sale” by the appellant to their customers includes the service element also; that the appellant did not place the orders on the foreign supplier on their own, but on receipt of the orders from their customers and thereafter they placed the orders on the foreign supplier and for which purpose they were charging 1 to 1.5% margin to cover expenses. Inasmuch as this activity of the appellant would constitute procurement of goods on behalf of the client and Service tax liability arises, submitted the representative who also prayed that the appellant be put to terms.

The Bench observed –

"6.1 From perusal of the import documents as well as invoices, it is evident that the transaction is one of trading or sale. The mark-up/trade margin charged by the appellant is also subject to customs duty as part of the transaction value. If that be so, there is no reason why the same part of the transaction value should be taken out of the customs transaction and subjected to Service Tax under the guise of Business Auxiliary Services. The Board's Circular dated 11.05.2004 also clarifies that the customs duty liability is to be discharged on the value inclusive of trade margin in the case of High Seas Sales transaction."

Following the precedent decision in the case of M/s Indian Oil Corporation Limited, the CESTAT granted waiver from pre-deposit of the adjudged dues and stayed the recovery during the pendency of the appeal.

(See 2013-TIOL-1266-CESTAT-MUM)


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Activity, if covered under law as a taxable service, will not cease to be a taxable service because its value forms part of the value on which customs

The only relevant factor for deciding whether an activity is leviable to service tax is whether the activity is covered as a taxable service under the provisions of the Finance Act, 1994. If it is so covered, it attracts service tax. The fact that another indirect tax on another aspect of the activity has been or is liable to be levied on a value that includes the value of the said activity will not render the activity not liable to service tax. Any value based indirect tax system works in this manner in the chain of consumption and supply of goods and services. The fact that a part of the value of the goods or services has already suffered tax at the consumption stage would not mean that no tax shall be leviable on the value added goods or services at the supply stage. There is no statutory or constitutional bar against such levy. However, in accordance with the provisions of the relevant tax laws, at each stage of this chain, credit of taxes paid on goods and services consumed is allowed, which may be utilised for payment of taxes at the stage of supply. The question of the entitlement or otherwise of such credit in individual cases is to be determined with reference to the facts and the provisions of the relevant tax law.
N. Sathyanarayanan, Trichy

Posted by Sathyanarayanan N
 

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