Case nº Ruling No. AAR/ST/10/2016 in Application No. AAR/44/ST/03/2014 of AAR Cases, April 01, 2016 (case In Re: Berco Undercarriages (India) Pvt. Ltd. Vs)
| Judge | For Appellant: A.K. Batra, Advocate |
| President | V.S. Sirpurkar, J. (Chairman), S.S. Rana and R.S. Shukla, Members |
| Resolution Date | April 01, 2016 |
| Issuing Organization | AAR Cases |
Judgment:
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Berco Undercarriages (India) Pvt. Ltd., Hyderabad (hereinafter also referred to as the applicant) intends to import raw material under International Commercial Terms i.e. Free Carrier (FCA); that the applicant proposes to appoint a foreign C & F Agent for necessary support in case of material handling, arranging shipping liners, ocean freight, material clearance both at origin and destination port and other related local transportation etc.; that foreign C & F Agent would issue a composite bill/invoice in his respective currency. Applicant states that on said composite bill/invoice, all duties of Customs would be paid. The question raised by the applicant before this Authority is;
"While discharging the foreign C & F Agent raised composite bill/invoice liability, which portion of amount will attract Service Tax obligation under reverse charge mechanism?"
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Revenue has submitted that as far as value of taxable service under C & F Agent for charging Service Tax on importation of service under reverse charge mechanism is concerned, the applicant has to pay Service Tax on the gross value billed by C & F Agent, excluding the expenditure incurred by C & F Agent as "pure agent", as defined in Rule 5 (2) of Service Tax (Determination of Value) Rules, 2006.
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During proceedings before this Authority, applicant submitted that a foreign C & F Agent would be incurring the expenses on behalf of the applicant with respect to freight, insurance, loading, unloading and handling charges of goods, etc. proposed to be imported. Further, all these expenses incurred are included in the valuation of goods as per Section 14 of the Customs Act, 1962 for the purpose of charging Customs duty. Therefore, charging Service Tax on said component would tantamount to double taxation. Applicant relied upon the judgment of Tribunal in United Shippers Ltd. v. Commissioner of Central Excise, Thane-II 2015(37) STR 1043 (Tri-Mumbai) wherein it was inter alia observed that when the goods are being transported by the barges from the mother vessel to the jetty onshore, that activity is part of the import transaction of bringing the goods into India from a place outside India; that question of rendering any service in respect of such goods by way of cargo handling or otherwise can take place only after the customs transaction is completed; that therefore the levy to Service Tax the transportation by barges from the mother vessel to the jetty on-shore, would not arise...
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