In a recent ruling, the Delhi bench of the CESTAT held that the activity of co-loader service to other courier agencies amount to Business Auxiliary Service and therefore, service tax is liable to be charged in respect of such services.
The assessee, in the instant case is engaged in courier service. The Department levied service tax on the assessee in respect of co-loader services provided by the appellant to other courier service companies for delivery of domestic courier packets as well as imported courier packets. The Department took a stand that such services are taxable under the head “BAS”. It was further observed that the consideration received by the appellant for packets booked for delivery to other countries are taxable on the ground that the activity did not belong to export of service since no foreign exchange was realised for these transactions by the appellant.
The appellants contended that the activity of co-loader service to other courier agencies cannot be considered as a provision of Courier Service on behalf of their agencies for the reason that it was undertaken on principal to principal basis. It was also submitted that no tax is leviable on the amount received by the appellant from abroad since the amount involved in these consignments have been realised by them from abroad by adjustment in foreign exchange against payments owed by them to courier companies abroad, which constitute foreign exchange.
“In the present case, where the appellant has worked as co-loader their role is limited to delivery of the packets to the ultimate customer. For this activity, they have received consideration from the first courier agency. From the nature of the activity undertaken by the appellant, it cannot be said that they have carried out courier service on behalf of another.”
“Further, the activity also does not qualify to be called as provision of service on behalf of the client. This is because the taxable activity envisaged under this category of BAS is that while the client is obliged to provide some service to a third person but instead of the client providing such service, the service provider provides such service to the third person, on behalf of the client, i.e., acting as an agent of the client. Admittedly, in the present case, there is no 3rd person. Thus, the activity so undertaken does not fall under BASor any other existing taxable services.”
Regarding the second ground, the Tribunal observed that the amount has been received by the appellant by way of adjustment out of the amounts which they were liable to pay to the foreign courier companies as payment for courier packets exported for delivery in foreign destination. Further, such receipts are exempted as per the Notification No.21/2003-ST, dated 20.10.2003.
Read the full text of the order below.