Appellants not liable for service tax on transportation from Nepal border to factory premises

The Tribunal held that the appellants were not liable for service tax on GTA services for transportation from the Nepal border to their factory premises. The Tribunal emphasized that the transportation expenses were billed by the Nepalese suppliers, who engaged the transporters, and the appellants reimbursed them as part of the goods' supply contract. As there was no agency relationship for transportation between the appellants and the suppliers, the appellants were not considered recipients of GTA services. The Tribunal's decision in similar cases was followed, leading to the appeal's allowance and setting aside of the previous order with consequential relief for the appellant.

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Issues: Service tax liability on reverse charge basis for transportation from Nepal border to factory premises.

Analysis:
The appellants, engaged in manufacturing grey fabrics, imported yarn from Nepal. The Nepalese exporter issued two types of invoices: one for the goods' value and another for additional expenses like transportation, clearance, insurance, cartage, handling, and forwarding charges. The revenue contended that the transportation service from the Nepal border to the appellants' factory required them to discharge service tax liability on a reverse charge basis. Consequently, proceedings were initiated, resulting in an order by the Deputy Commissioner confirming a demand of Rs. 60,750 along with penalties under sections 76, 77, and 78 of the Finance Act 1994. The Commissioner (A) upheld this order, leading to the present appeal.

Upon review, it was noted that similar orders were passed for other appellants, whose appeals were allowed by the Tribunal. The Tribunal observed that the Nepalese suppliers, not the appellants, engaged the transporters and billed the appellants for both the goods' value and transportation expenses. The Tribunal emphasized that the appellants reimbursing the Nepalese suppliers for transportation expenses did not make them liable for service tax on GTA services. The Tribunal highlighted that the contract between the appellants and Nepalese suppliers was for the supply of goods, with transportation being incidental to the goods' supply. As there was no evidence of the Nepalese suppliers acting as agents of the appellants for transportation arrangements, the appellants could not be considered recipients of GTA services.

The Tribunal's decision in similar cases was followed by the present Bench in a related matter. Considering the issue's resolution in previous cases, the impugned order was set aside, and the appeal was allowed with consequential relief for the appellant.

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