ST - Levy of tax on transaction which pertains to activities outside the country is not appropriate: CESTAT
By TIOL News Service
MUMBAI, JUNE 11, 2018: THIS is a Revenue appeal.
Respondent is registered as provider of 'manpower recruitment and supply agency service' and it was alleged that they failed to discharge tax liability on remittances received from workers abroad during the period 2002-03, 2003-04, 2004-05 and which were not declared in the service tax returns but entered in the relevant profit and loss account.
Furthermore, for the period 2003-04 to 2006-07, it was alleged that the respondent had earned commission on sale of air tickets and insurance/other service for a total value of Rs.27,31,732/- but failed to discharge tax liability as provider of 'Business Auxiliary Service'.
The order of the original authority confirming the demand on both counts was set aside by the Commissioner(A) by relying on the Tribunal decision in Rochees Watches Ltd - 2005-TIOL-440-CESTAT-DEL and the Board Circular 56/5/2003-ST dated April 25, 2003.
In appeal before the CESTAT, the AR submitted that the CBEC circular (supra) is not binding in view of a contrary position in law; that the want of exemption notification between 1st March 2003 to 19th November 2003 [after notification no. 6/99-ST dated 9th April 1999 was rescinded by notification 2/2003-ST dt. 01.03.2003 and the reinstatement thereof vide notification no. 21/2003-ST dated 20th November 2003] could not be bridged by a mere circular and for this reliance was placed on the apex court decision in Ratan Melting & Wire Industries - 2008-TIOL-194-SC-CX-CB. On the second issue, the AR relied on the decision in Patel Air Freight - 2017-TIOL-171-CESTAT-DEL to contend that the commission received on booking of cargo on airlines was liable to tax and that the booking of tickets and purchase of insurance on which commission had been received were liable to be taxed similarly.
On both the issues, the CESTAT observed -
++ It is surprising that Revenue now makes a plea that a circular issued by the Central Board of Excise and Customs and binding upon lower authorities should be ignored. The said circular was intended to ensure that the fundamental principle of export goods/services being relieved of the burden of taxes/duties should not be discarded in the absence of an exemption notification. There is no dispute that the consideration was received in convertible foreign exchange and there is no dispute that the customers of the appellant were situated outside the country. In these circumstances, the levy of tax on transaction which pertains to activities outside the country is not appropriate .
++ In the present matter, the respondent made bulk purchases of air tickets that were then assigned at market price to various successful candidates proceeding abroad.
++ The provisions of Finance Act, 1994 are very clear; it is the service that is taxable and not a money transaction between two entities. Revenue has not been able to establish that the said activity of purchasing seats which have been sold to individual travelers are liable to be covered by the definition of 'business auxiliary service' in section 65(19) of Finance Act, 1994. [Greenwich Meridian Logistics (India) Pvt. Ltd. - 2016-TIOL-869-CESTAT-MUM which held that a similar transaction in relation to cargo creates profit on sale and is not a consideration for taxable service, relied upon.]
Holding that there is no reason to interfere with the findings in the impugned order, the Revenue appeal was dismissed.
(See 2018-TIOL-1773-CESTAT-MUM )
