By TIOL News Service

MUMBAI, DECEMBER 07, 2018: THE assessee is registered for rendering "Courier Service".

The  facts are that the appellant provides services in the following manner:-

(a) They collect cargo from the clients located in India and deliver them outside India. The clients are paying courier charges invoiced by the appellant in India. The appellant is paying service tax on these charges. After delivering the courier outside India, they are getting certain amounts from the foreign entity. Revenue has demanded the service tax on the same under courier service/under reverse charge mechanism.

(b) A client located in India delivers courier to the appellant to deliver outside India and does not pay courier charges but the  courier charges are paid by the recipient of the courier outside India. The foreign entity of the appellant is collecting courier from the appellant and sends it to the foreign recipient. The appellant receives certain amount from their foreign entity towards rendering of services to collect courier and deliver it at port from the client. Revenue is of the view that on this activity the applicant is required to pay service tax.

(c) The foreign entity is receiving courier to be delivered in India and the appellant is delivering the courier as directed by their foreign entity. Revenue is of the view that in this case, as service recipient is located in India and service is performed in India, therefore, the applicant is required to pay service tax on the charges received from the foreign entity towards performing of this service.

Against the confirmation of Service Tax demand of Rs.67.89 crores along with imposition of equal penalty and interest by CCE, Mumbai the appellant filed an appeal before CESTAT along with a Stay application.

The Bench ordered pre-deposit of Rs.6 crores.

We reported this order as - 2014-TIOL-1986-CESTAT-MUM.

The appeal was heard in June and an order has been issued recently.

After considering the elaborate submissions made by both sides, the CESTAT extracted the definition of "Courier service" and inter alia observed-

On merits:

++ The definition itself provides that the person could have carried the said documents, goods or article himself for delivery to consignee or could handover to some other person to accompany the said time sensitive documents, goods or article, for delivery. Another notable aspect of the definition is the absence of words "consignor" and "consignee" from the said definition. In absence of the said words in the definition, it is immaterial whether the consignment being carried is handed over by the consignor for delivery to the consignee, or by any other person. The essence is that the person should be providing the service of transportation of time sensitive documents, goods or article, by accompanying the said time sensitive documents, goods or article, either himself or by employing the service of any other person. Thus if one courier agency books the consignment and hands over the same to another courier agency for further delivery, then both the persons are providing the courier agency service.

Citing the Tribunal decision in Vijayanand Roadlines - 2005-TIOL-1605-CESTAT-BANG and which has been upheld by the Apex Court, the Bench noted that the crux of the said decision is that the phrase "door to door" does not restrict the scope of definition of the "Courier Agency" to the activity of person picking up the time sensitive documents and goods from the doorstep of consignor for delivery to the doorstep of consignee.

Based on the ratio of the said decision, the CESTAT examined the terms of "International Transportation Services Agreement" dated 30/10/2010 entered by the appellant and further observed-

"6.2 From the above clauses of the agreement it is evident that both, the Appellants and UPS Worldwide are engaged in the export and import of freight forwarding of express documents/parcels and shipments. Further the territory and scope of operations of both are well defined by the agreement. As per the agreement, appellants are rendering services only within the territory of India and no part of such service is rendered outside India. This agreement is an instrument by which UPS Worldwide has bifurcated its operation of undertaking door-to-door delivery of time sensitive documents and goods into various parts. They undertake door-to-door delivery of the time sensitive documents and goods through various entities created with specific territorial jurisdiction. Appellant in the scheme of things provide the services in the territory of India. Appellant as such would not be in position to undertake the delivery or pickup of consignments from the foreign territory. Thus they deliver the time sensitive documents and goods to UPS Worldwide for getting them deliver to the consignee located in foreign territory, through UPS Foreign entity. Similarly UPS Worldwide delivers the time sensitive documents and goods picked up from foreign territory to the appellant at the international airport for delivery of the same within the territory of India…"

Based on the sample documents placed before the Bench in respect of Export Pre-paid, Import Pre-paid and Export Freight Collect, the Tribunal observed that in case of Export pre-paid, UPS Worldwide has provided Courier Agency Service to Appellants, and in case of Import Prepaid and Export Freight Collect, appellant's have provided Courier Agency Services to UPS Worldwide.

After citing and extracting from the Board Circular No 96/7/2007-ST dated 23.08.2007, the Bench further observed-

"6.7 …in case of Export Pre-paid, where the consignments are booked by the Appellant for delivery in foreign territory, appellants receive the services from UPS Worldwide for picking up the said consignments from International Airport for delivery in foreign territory. Since Appellants have received the services from UPS Worldwide and the origin of the said services is within India, service tax required to be paid by UPS Worldwide is to be paid by the Appellant on reverse charge mechanism as provided for in Section 66A of Finance Act, 1994 read with rule 3(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.

6.8 It is quite evident from the agreement that entire services provided by the appellant to UPS Worldwide for picking up the consignments in case of Export Freight Collect and for delivery in the case of Import pre-paid have been provided in India. Since these services are provided in India, they are liable to service tax. Appellants have claimed exemption treating the services provided as Export of Service as the payment was received in convertible foreign exchange. To treat a particular transaction or provision of service as export of service, during the relevant period, reference is to be made to Export of Service Rules, 2005…Thus for taxable service specified in Rule 3(1)(ii) before provision of service can be treated as export of service, two conditions are mandatorily required to be fulfilled namely, some part of the service needs to be necessarily be provided outside India and the payment against provisioning of such service is received in convertible foreign exchange. In the present case as per the agreement between appellant and UPS Worldwide, the appellant is performing entire services, within India and no part of the service is provided outside India. Admittedly the services provided by the appellant are courier agency service defined under Section 65(105)(f), and specified by the Rule 3(1)(ii). Thus in view of the fact the no component of service has been provided by the appellant outside India, the services provided by them to UPS Worldwide cannot be termed as export of services, even if the payment against them are received in convertible foreign exchange. Thus exemption claimed by the appellant against provision of these services, by treating them as export of service is not admissible."

On Limitation, Penalties, Interest:

++ It is quite evident that appellants had not disclosed the amount of payment received by them against the services provided by them to UPS Worldwide in respect of which they claimed exemption treating them to be export of services, in their ST-3 returns. Further they had never disclosed the amounts in respect of which they were required to discharge the service tax liability on reverse charge basis. The agreement between the appellant and UPS Worldwide was also not disclosed to the revenue. Since appellants were required to disclose these details in their ST-3 returns and have not disclosed the same they have knowingly suppressed the relevant information from revenue.

The Bench, therefore, concluded that the extended period of limitation had been correctly invoked. Insofar as challenge to the quantification, the Bench held that since the same was computed as per the information submitted by the Appellants themselves, the same could not be disputed. Penalties and interest imposed by the adjudicating authority are also upheld.

The appeal is dismissed.

In passing: Incidentally, the CESTAT had while disposing of the Stay application (and directing the applicant to make a pre-deposit of Rs.6 crores) had mentioned the following in paragraphs 4(a) & 4(b) of its order dated 14 October 2014 -

(See 2018-TIOL-3689-CESTAT-MUM)