ST - Appellant rendering intermediary service to Postal department - If ST is paid, same shall be available as Cenvat credit and to that extent net liability of ST shall stand reduced while paying ST by postal department - Therefore, it is an exercise of revenue neutrality & for this reason demand does not exist: CESTAT
By TIOL News Service
MUMBAI, JAN 27, 2016: THE appellant assessee has been appointed as Outsourcing Agent by postal authorities, Department of Posts and is acting as agent for promotion of postal services. The undisputed fact is that postal department is discharging the service tax on the entire value of services being collected from the customers.
The assessee is acting as intermediary for collection of letters, collection/dispatch of Speed Post/Export Delivery Letter etc., affixing postal stamps for which he is getting commission from postal department on the turnover.
Holding that the assessee is an independent service provider and the postal department is a service recipient of the said services, for which commission is being paid, the Revenue was of the view that this independent activity is liable for service tax under BAS.
The adjudicating authority confirmed the demand but the Commissioner (Appeals) dropped a part of the demand on the ground of limitation holding that no suppression or mis-declaration or fraud is established.
Both, the assessee and the Revenue are before the CESTAT against this order.
The appellant assessee submitted that overall postal services were provided to various clients and on such services postal department is discharging the service tax liability on the total value which includes the service charges of the assessee also, therefore, service tax on service charged by the assessee has also been paid by the postal department;that if the assessee is asked to pay separate service tax, it will amount to double taxation which is not permissible in the law; that it is only one service i.e postal service and assessee is acting as intermediary, therefore, they cannot be held liable for payment of service tax. Reliance is placed on the following decisions viz. Popular Vehicles & Services Ltd. - 2010-TIOL-776-CESTAT-BANG, Cochin Port Trust - 2011-TIOL-80-CESTAT-BANG & DNS Contractor - 2014-TIOL-752-CESTAT-DEL in support.
The AR submitted that the assessee is an independent service provider and their tax liability cannot be avoided only for the reason that postal department is discharging the service tax on the total postal services; that in the Service Tax law every individual who provides the services is liable to pay Service Tax irrespective of the service subsequently merged with other services and service tax is discharged in the hands of the service recipient. Further, as regards the Revenue appeal, it is emphasized that since the assessee had not disclosed their activity to the department, it amounts to suppression of facts and the larger period of limitation is correctly invoked.
The CESTAT observed that it found it prudent to first examine the issue of revenue neutrality.
The Bench noted -
…the fact is not under dispute that the services provided by the assessee is at the most considered as input services for the postal department. The postal department is admittedly paying the service tax on the total value of the services which obviously includes service value of the assessee. In this situation, if service tax is paid by the assessee, the assessee's services is an input service for the postal department and postal department is entitled for Cenvat credit, thus in our view the present case is of Revenue neutral as the postal department is entitled for CENVAT credit of the service tax if at all payable by the assessee. This Tribunal, time and again held that in case of revenue neutral the demand does not exist…
Extracting the cases cited by the assessee, the Bench concluded -
…it is clear that if service tax is paid by the assessee, same shall be available as Cenvat credit to the postal department and to that extent net liability of service tax shall stand reduced while paying the service tax by the postal department. Therefore, it is an exercise of revenue neutral for this reason demand does not exist. We, therefore, drop the demand on the point of revenue neutrality without addressing the issues of taxability of service tax and limitation…
In fine, the appeal by the assessee was allowed and that filed by Revenue was dismissed.
(See 2016-TIOL-262-CESTAT-MUM)
