Foreign-based Consignment Agents/Distributors are liable to Service Tax u/s 66A of the Finance Act: CESTAT

Foreign-based Consignment Agents - Distributors - Service -Finance Act - CESTAT - taxscan

The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that Foreign based consignment agents/distributors are liable to service tax u/s 66A of the Finance Act.

Shri Paresh M. Dave, Advocate appeared for the Appellant and Shri Dinesh Prithiani, Assistant Commissioner appeared for the Respondent.

 During the scrutiny of ST-3 returns and Income tax returns, the department noticed that the appellant, Messrs Fresh top Fruits Ltd, had shown Foreign Selling Expenses and Foreign Sea Freight in their books of account. The said expense and sea freight expenses 66A and Appellant have not paid the Service tax on foreign selling expenses and sea freight expense. After scrutiny of records and documents, a show cause notice dated 07.10.2011 was issued to the Appellant proposing a service tax demand of Rs. 4,10,38,988/- and imposition of penalties under the provisions of the Finance Act, 1994. 

While the aforesaid show cause notice was pending adjudication, another show cause notice dated 05.10.2012 for the subsequent period also came to be issued on the same issue by the department proposing to demand of Service tax of Rs. 47,05,066/- along with another proposal for interest and penalties under the Act. After following the due process vide impugned common Order the Learned Commissioner has confirmed the entire demand raised in both the SCNs along with interest and penalty. 

He also submits that in the present case, the amount /value of expenses on which service tax is demanded are all for the activities and services beyond the territory of India; because all the heads of expense initially paid by the consignment agent are for the activities and services after the goods leave India.

When no service was rendered in India, service tax liability would not arise.  When any service is provided outside India and the role of the overseas entities commences upon the landing of the goods in foreign countries, then the role of the overseas entities commenced and ended beyond the border of India. Rule 3 of the Taxation of Service tax Rules 2006 is not attracted in such a case

The CESTAT bench consisting of Mr Ramesh Nair, member (judicial), and Mr Raju, member (technical) observed that the services provided by Foreign Agents were received by the Appellant where the services were received outside India.

It has also been contended by the assessee that the services provided by Foreign Agents do not fall within the scope of the definition of C&F Agent Service and are classified under Business Auxiliary Service and services of a commission agent about agricultural produce were exempt under Notification No. 13/2003-ST dated 20.06.2003.

The Tribunal remanded the issue for denovo adjudication and set aside the impugned order. The appeal was allowed by way of remand to the Adjudicating Authority.

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Messrs Freshtop Fruits Ltd vs C.S.T.

Counsel for Appellant:   Shri Paresh M. Dave

Counsel for Respondent:   Shri Dinesh Prithiani