The Chennai bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) held that the Service Tax on consideration received by the appellant from the Foreign Service Recipient under Storage and Warehousing services cannot be subject to levy of service tax.
The appellants are engaged in the business of logistics supply, chain management, clearing & forwarding, licensed CHA, etc., and are rendering services at Free Trade Warehousing Zone (FTWZ), as per Authorized operations of Letter of Approval (LOA) issued by the Development Commissioner for providing various logistic services.
On the basis of investigation conducted by DGCEI, that appellant though rendered storage and warehousing services within the FTWZ to clients based abroad as well as Indian clients during the period July 2012 to March 2015 they did not discharge service tax on such services.
They also did not discharge service tax on various other services accounted for by them. SCN was issued proposing to demand service tax on the services provided by them from the Free Trade Warehousing Zone(FTWZ) zone exclusively to foreign-based clients.
After due process of law, the original authority held that the services provided to foreign clients do not qualify as export of services and thus confirmed the demand, interest and imposed penalty. On appeal, the Commissioner (Appeals) upheld the same. Hence this appeal.
The Coram comprising of Judicial Member, Sulekha Beevi C.S and Technical Member, Anil K Shakkarwar delivered the order based on an appeal filed by M/s Broekman Logistics India Pvt Ltd.
The bench observed the overriding effect of section 51, Section 26 provides for exemption of duties and taxes. Section 26, Clause (e) provides for exemption from service tax. Section 51 states that the Act will have an overriding effect notwithstanding anything inconsistent in any other law. This Act thus will override the Finance Act, 1994, as well as the Rules framed thereunder to give effect to the exemption contained in Section 26.
The bench further said that the consideration is received in foreign currency as well as the service recipient is a person placed outside India. The department cannot then contend that there is no export of services. The demand of service tax on consideration received by the appellant from the foreign service recipient under Storage and Warehousing services cannot be subject to levy of service tax under reverse charge mechanism.
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