By TIOL News Service

MUMBAI, JULY 05, 2017: THE appellant undertakes exports of goods procured from domestic clients against advance payments as per agreements and the various components of the sale value recovered as ‘trade margin' i.e. the difference between the sale price and the purchase price, are sought to be taxed as consideration for providing of ‘business auxiliary services' taxable under section 65 (105) (zzb) of Finance Act, 1994.

It is contended on behalf of the appellant that the goods are sold on ‘high seas' and hence constitute a sale that precludes recourse to tax under Finance Act, 1994 on such transaction.

The AR refuted the claims of the appellant and took the support of the decisions in Hyderabad Industries - 2002-TIOL-31-SC-CUS and Rajasthan State Beverage Corporation Ltd. - 2013-TIOL-1110-CESTAT-DEL.

The Bench observed thus –

"5. It appears from the investigations that the appellant deducts service charges of 2% on exports, bank charges and trade margin etc. If the transactions were one of trading, the appellant would have treated the sale value of goods as receipts from which expenditures is to be deducted instead of treating them as receipts. Taken in conjunction with the admitted fact that the appellant does not, at any stage, become the owner of the goods, there can be no doubt that the said income is not trading profit but is consideration for some specific services rendered by the appellant."

Negating the claim of the appellant that the impugned order ought to have determined the assessable value by invoking section 70 and section 72 of Finance Act, 1994 before proceeding to section 73, the Bench held that section 73 is the sole statutory authority for initiating recovery proceedings.

Concluding that the grounds of appeal are devoid of any cogent submissions to controvert the findings in the impugned order, the appeal was dismissed as being devoid of merits.

(See 2017-TIOL-2283-CESTAT-MUM)