Case Law Details
ATA Freightline (India) Private Limited Vs Principal Commissioner of CGST & CX. (CESTAT Mumbai)
Summary: ATA Freightline (India) Pvt. Ltd. successfully appealed a service tax demand before the CESTAT Mumbai. The dispute stemmed from the service tax department’s claim that services provided by ATA Freightline, under an agreement with its New York counterpart, did not qualify as export of services, thereby making them taxable in India for the period from April 2015 to June 2017. The department based its demands on an earlier audit report, similar to one that was previously adjudicated and set aside by the Tribunal for the period from July 2012 to March 2015. In its May 2022 ruling, the Tribunal determined that Rule 4 of the Place of Provision of Services Rules, 2012 was not applicable, and the services should be treated as exports, exempt from service tax. Given the identical nature of the cases, the Tribunal ruled in favor of ATA Freightline for the subsequent period as well, setting aside the impugned order and allowing the appeal. The decision reaffirms that the services in question were correctly classified as export services, thereby exempting them from Indian service tax liabilities.
The adjudication order dated 28.02.2018 passed by the department in confirming the adjudged demands on the appellants relate to the period July 2012 to March 2015. Based on the same audit report and the agreement dated 01.02.2012, referred to in the earlier adjudication order dated 28.02.2018, the present proceedings were initiated for confirmation of the adjudged demands for the subsequent period i.e., April 2015 to June 2017.
The matter was argued by Ld. Counsel Mahesh Raichandani
FULL TEXT OF THE CESTAT MUMBAI ORDER
Briefly stated the facts of the case are that the appellants herein are, inter alia, engaged in providing integrated logistics and cargo transportation services and for that purpose, were registered with the service tax department. In this case, the appellants had entered into an agreement dated 01.12.2012 with M/s. ATA Freight Line Ltd., New York for providing logistic and allied/ancillary services (transportation of cargo by air, land and ocean). During the disputed period, the service tax department had conducted the EA-2000 Audit of the records maintained by the appellants. During the course of audit, it was alleged that the services provided by the appellants cannot be considered as export of service in terms of Rule 6A of the Service Tax Rules, 1994. Based on the audit report, the service tax department had initiated show cause proceedings against the appellants, alleging that the activities involved in the transactions of “Ex Works” and “Handling charges in relation to export of goods” are liable for payment of service tax, as the said services were performed in India. It has further been held that the services performed by the appellants in the taxable territory i.e., India should appropriately be determined under Rule 4 of the Place of Provision of Services Rules, 2012 for the purpose of determination of the place of provision of services, whether in India or elsewhere. The show cause notice (SCN) dated 10.07.2019 issued by the department was adjudicated by the learned Principal Commissioner, Central Excise and GST, Pune-I vide the impugned order dated 19.03.2021, wherein service tax demand amounting to Rs.4,80,14,897/- was confirmed along with interest and penalties were imposed on the appellants under Section 77 and 78 of the Finance Act, 1994. Feeling aggrieved with the impugned order, the appellants have preferred this appeal before the Tribunal.
2. Heard both sides and perused the case
3. We find that on the basis of the agreement entered into between the appellants and M/s. ATA Freight Line , New York, the service tax department had initiated show cause proceedings against the appellants, which were culminated into the adjudication order dated 28.02.2018, in confirming the adjudged demands on the appellants. On appeal against the said order dated 28.02.2018, the Tribunal vide Final Order No. A/85480/2022 dated 19.05.2022 has set aside the adjudication order and allowed the appeal in favour of the appellants. The period involved in the said disputed case was from July, 2012 to March, 2015. Considering the facts and circumstances of the case vis-à-vis the statutory provisions, the Tribunal has held that the provisions of Rule 4 of the Place of Provision of Services Rules, 2012 shall not be applicable and the appellants shall not be liable for payment of service tax inasmuch as the transaction in question should be considered as export of service. The relevant paragraphs recorded in the order dated 19.05.2022 (supra) are extracted herein below:
“11. It would appear that there is no demand for the pre – ‘negative list’ period and that it was only the inevitable passage of ‘export goods’ through India at commencement of outward journey till loading on ‘foreign going’ vessel/aircraft that was considered to be necessary and sufficient reason for invoking rule 4 of Place of Provision of Service Rules, 2012. In this implied convergence of rule 4 and rule 10 of Place of Provision of Service Rules, 2012, the transaction between M/s ATA Freightline Ltd, New York and M/s ATA Freightline (India) Pvt Ltd was split – as one within India and one thereafter – by appropriating the accountal segregation adopted by the appellant. The finding of
‘72.2 As per Rule 4(a) of Place of Provision of Service Rules, 2012, the goods are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service. I find that in the instant case Industries John Deere SA, Mexico &Bennett Distribution USA, “the importer of the goods” from the exporter, M/s., John Deere India Pvt. Ltd. is the receiver of service and ATA, USA is the provider of service. ATA, USA had deployed the assessee to perform the activity of providing of logistics service/cargo handling services on behalf of them (ATA, USA), in this case the assesse was acting on behalf of the provider of services and goods were physically made available to the assessee at the factory of the exporter i.e in the taxable territory in India. Hence, I find that the provision of Rule 4(a) of Place of Provision of Service Rules, 2012, is applicable in this case and the place of provision is the taxable territory in India.
in the impugned order is not intriguing as the location of provider and recipient of ‘service’, identified by the original authority suffices, in the context of section 65B (44) and section 65B (51) of Finance Act, 1994, to place the activity outside ‘taxable territory’ insofar as the levy under Finance Act, 1994 is concerned, had to be discredited.
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15. The question that arises, even assuming that the accounting treatment of ‘consideration’ is amenable to geographical segregation as markers of a series of activities that make up ‘service’, is the scope for disaggregation of ‘service’ without ascertainment of conformity of each of the segments with ‘(44) …….. any activity carried out by a person for another for consideration and includes ….’ in section 65B of Finance Act, 1994 which is a pre-requisite for separate taxability, and exemption, under the authority of section 66B of Finance Act, 1944. The crux of the determination of tax liability in the impugned order is the rendering of ‘service’ between the premises of exporter and loading on ‘foreign going’ vessel/ aircraft which, according to the adjudicating authority, is implicit in the attribution of charges for that stage of transport. However, in terms of the definition, ‘service’ is not founded upon ‘consideration’ but is activity carried out by a person for another for consideration; impliedly, without the ‘another’ there can be no ‘service’ that is taxable. Unless the ‘another’ can be identified as ‘another’ other than the recipient outside the country, rendering of separate ‘service’ is not demonstrated.
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18. Place of Provision of Service Rules, 2012 is not a provision for charging of tax; it is limited to determination of location of taxable entity as an adjunct to the charging provision in section 66B of Finance Act, 1994. The impugned order has not evaluated the impugned activity from that perspective. In the context of identifiable recipient of service located outside the taxable territory, and concomitant absence of ‘goods provided by recipient of service’ as well as the marked absence of recipient of service in the truncated segment of impugned activity and of the goods being put to use for rendering of service, rule 4 of Place of Provision of Service Rules, 2012 is not applicable. That the activity is transportation of goods is the foundation of the proceedings against the appellant, as is evident from the contrived segmentation of stages according to geography and from the unarguable existence of recipient outside India; rule 10 of Place of Provision of Service Rules, 2012 is unambiguously clear about the consequent non- taxability.
19. For the above reasons, the impugned order is set aside and appeal allowed.”
4. The adjudication order dated 28.02.2018 passed by the department in confirming the adjudged demands on the appellants relate to the period July 2012 to March 2015. Based on the same audit report and the agreement dated 01.02.2012, referred to in the earlier adjudication order dated 28.02.2018, the present proceedings were initiated for confirmation of the adjudged demands for the subsequent period i.e., April 2015 to June 2017. Since, the Tribunal in the order dated 19.05.2022 had set aside the earlier adjudication order dated 28.02.2018 and allowed the appeal in favour of the appellants, we are of the view that the present appeal filed by the appellants should also be allowed inasmuch as the question involved in both the cases are identical.
5. Therefore, the impugned order is set aside and appeal is allowed in favour of the appellants.
(Operative portion of the order pronounced in open court)
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