By TIOL News Service

MUMBAI, OCT 25, 2018: THE appellant is registered with the department as a manufacturer as well as for payment of service tax on the GTA service.

The audit wing observed that the appellant had arranged trucks for delivery of manufactured goods at customer's destination and for such activity it had collected delivery charges from the customers. It was further observed that out of the total delivery charges collected, the appellant paid lump sum amount for transportation of the goods and retained the balance amount, which was reflected in the books of accounts under the head 'Freight Reimbursement'.

The department alleged that such extra amount retained by the appellant for delivery of the goods at the premises of the buyer should be considered as a taxable service under the category of 'Business Support Service'.

SCN was issued and resultantly a service tax demand of Rs. 16,97,498/- was confirmed along with interest and penalty.

The Commissioner(A) upheld this order and, therefore, the appellant is before the Tribunal.

It is submitted that delivery charges collected from the buyer were reflected in the invoice separately and are in context with the manufacture and sale of the excisable goods; that as a manufacturer of excisable goods, the applicant had only facilitated the buyers for delivery of the goods at their destination, which cannot be considered as a service inasmuch as by providing transportation facility, the appellant had never supported the business of the buyers; that the trucks used by the appellant were owned by it and cannot be liable to payment of service tax under 'business support service'.

The Bench considered the submissions and after going through the purchase orders observed -

+ There were no separate agreements between the buyers and appellant for providing any service, over and above supply of goods.

+ In other words, there is no involvement of a service provider and a service receiver relationship in the sale transaction made between the parties… the invoices issued by the appellant reflected the assessable value of the goods, statutory levies, and transportation cost etc.

+ Since transportation cost incurred was in context with delivery of goods at the buyers premises, it cannot be said that such facility extended by the appellant should be considered as a taxable service, leviable to service tax under the category of 'business support service'.

+ Further, the appellant, in the present case, had not supported the business of the buyers in any manner and arrangement of transportation was just to facilitate delivery of the duty paid excisable goods at the buyer's premises. Thus, the activities undertaken by the appellant, in our considered view, do not conform to the definition of taxable service, for the purpose of levy of service tax thereon.

Concluding that there are no merits in the impugned order, the same was set aside and the appeal was allowed.

(See 2018-TIOL-3226-CESTAT-MUM)