R“One has to see the nature of the service in total. Segmenting the series of actions involved in the provision of a particular service, would result in ridiculous propositions.”
In a significant case, the Chandigarh Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that no service tax is demandable separately under section 66F of the Finance Act, 1994 on GTA Service provided in Composite Services.
The appellants, M/s ATA Freight Line Private Limited, are duly registered with Service Tax. An Audit of the records of the appellant was conducted, it appeared that the appellants, under an Agreement with their principals i.e. ATA, USA provide services to them and receive services, they bifurcate the charges for ex-work services, handling charges and sea freight charges payable to each other.
The appellant books space in the air/ sea crafts and sell the same to their prospective customers; the appellants receive certain commission from the air/ sea liners in respect of this activity, the revenue viewed that the appellants performed the activity falling under “Business Auxiliary Service”.
The appellant recovers certain charges, from the Indian exporters, concerning the expenditure, on Custom duty, delivery order charges, port handling etc., at the destination in foreign ports.
A show-cause notice was issued to the appellant seeking to recover Service Tax of Rs.2,80,26,749/- along with interest while seeking to impose penalties under Sections 76, 77 & 78 of the Finance Act, 1994and was confirmed by the Commissioner (Audit).
Shri Mahesh Raichandani, Counsel appeared for the appellants submitted that the appellant reserves space in carrier vessels or aircrafts for export of cargo; the appellant does not have contract with the carriers but reserves space on spot rates and books space on various vessels/ aircrafts.
Further submitted that while they discharged Service Tax on the commission received, they do not pay Service Tax on the discount as it is not towards any service but an incentive earned in the purchase and sale of space.
GTA Service provided is a single composite service which may include intermediary/ ancillary service such as loading/ unloading, packing/ un-packing, transshipment, temporary warehousing; as the services provided to a foreign customer and remuneration is received in convertible foreign exchange, the service merits to be treated as export by virtue of Rule 10 of POPS Rules, 2012 read with Rule 6A of Service Tax, Rules, 1994.
The services undertaken by the appellant are bundled services where the essential character is given by the main service i.e. GTA rendered to the foreign customers in the instant case. It is not open for the Department to artificially divide the activity into various services and charge tax separately as
A two-member bench comprising Mr S S Garg, Member (Judicial), Mr. p. Anjani Kumar, member (technical) observed that the Revenue has picked up some activities, from the bundle of services rendered by the appellants, in a convenient manner.
“One has to see the nature of the service in total. Segmenting the series of actions involved in the provision of a particular service would result in ridiculous propositions.”, the CESTAT viewed.
Further viewed that “the Department has not viewed the service rendered by the appellants in a holistic manner, ignoring the very fact that the services rendered by the appellants are not complete just by loading of the goods on a vessel or on an aircraft. They go beyond.”
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