By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Recovery of destination charges for services provided by foreign-service provider for clearance of goods is liable to service tax under clearing & forwarding agent’s service. Freight margin earned from freight forwarding activity may not be exigible to service tax under clearing and forwarding services. Early hearing granted.
Facts:
The appellant registered under clearing & forwarding agent’s services was audited. The department found difference in the amounts captured in the ST-3 returns and the financials. The appellant did not provide reconciliation of the difference before the adjudicating authority but before the Tribunal reconciled it and submitted that the said difference was on account of (a) margin of freight on account of freight forwarding activity and (b) recovery of destination charges from its clients for service provided by foreign-service providers. The Tribunal considering the submissions of the appellant directed pre-deposit of Rs.40,57,603/- against which the appeal was made to the High Court. The appellant’s counsel submitted that freight margin was not exigible to service tax under the clearing & forwarding agent’s service and relied on the case of CCE, Panchkula vs. Kulcip Medicines Pvt. Ltd. 2009 (14) STR 608 (P & H). Recovery of destination charges is also not liable for service tax as service was provided outside India and therefore covered under Rule 3(ii) of the Import of Service Rules.
Held:
The Tribunal had found substance in the arguments of the appellant’s counsel and therefore scaled down the tax liability and further in respect of destination charges even though the Tribunal rendered a prima facie finding against the Appellant. The Hon. Court found this aspect arguable and therefore directed a pre-deposit of Rs. 20 lakh in cash and directed the Tribunal to hear the appeal in accordance with law and uninfluenced by any earlier observations.
