Service Tax not leviable on Clearing and Forwarding Agency Services provided Outside India: CESTAT [Read Order]

The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not leviable on clearing and forwarding agency services provided outside India.

M/s. Sundaram Industries Ltd, the appellant is engaged in the manufacture of moulded rubber products and other rubber articles and is also registered with the Service Tax Department for the payment of service tax on various categories of service. The appellant received services under the category of clearing and forwarding agency service from M/s. Project Management Inc. USA and paid service tax under reverse charge mechanism under the provisions of Section 66A of Finance Act, 1994 read with Rule 2(1)(d)(iv) of Service Tax Rules on the taxable value up to the month of June 2008.

From July 2008 onwards, the appellant stopped paying service tax and contended that as per Rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules 2006, they have no liability to pay service tax on the transaction as the services are completely performed outside India.

Show Cause Notices were issued proposing to demand the service tax along with interest and imposing a penalty. After due process of law, the original authority confirmed the demand along with interest and imposeda penalty. On appeal, Commissioner (Appeals) upheld the order.

The counsel Ms. Manne Veera Niveditha appeared and argued for the appellant. It was submitted that the appellant has paid charges for clearing and forwarding agency services provided by M/s. Project Management Inc. USA for the goods manufactured and exported by them. Section 66A of the Finance Act, 1994 when read along with the Taxation of Services (Provided from Outside India and Received in India) Rules 2006, the appellant is not liable to pay service tax as the services have been provided outside India. Shri M. Ambe, the counsel for the respondent supported the findings in the impugned order.

The demand has been raised alleging that the appellant is liable to pay service tax by reverse charge mechanism under the category of ‘Clearing and Forwarding Agency service’. These categories of services specified under sub-rule (ii) shall be excluded when the services are wholly provided/performed outside India.

The adjudicating authority has held that the said Rule would not apply to the appellant on the ground that the same would be applicable only when part of the services are performed in India.

In light of the case of Paramount Communications Ltd. Vs. CCE, Delhi – 2019 (29) GSTL 322 (Tri. Del.), thetwo-member bench of Ms Sulekha Beevi C.S., Member (Judicial) and Shri M. Ajit Kumar, Member (Technical) set aside the impugned order demanding service tax.

To Read the full text of the Order CLICK HERE

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