Tribunal rules in favor of appellant, service tax demand set aside for co-loader services

The Tribunal set aside the service tax demand on co-loader services provided by the appellant to other courier agencies, ruling that the services did not fall under Business Auxiliary Service (BAS). Additionally, the demand on amounts received from abroad for courier services was also dismissed as the payments were considered received in convertible foreign exchange, exempting them from service tax. Consequently, the appeal was allowed in favor of the appellant on both issues.

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Issues involved:
1. Service tax demand on co-loader services provided by the appellant to other courier service companies under Business Auxiliary Service (BAS).
2. Service tax demand on amounts received by the appellant from abroad for delivery of incoming courier packets and courier consignments exported on collect basis.

Analysis:

Issue 1:
The appellant, a provider of courier services, challenged the service tax demand on co-loader services provided to other courier agencies. The Department sought to charge tax under BAS, claiming the activity as providing courier service on behalf of other agencies. However, the CBEC clarified that co-loader services are not covered under courier service for service tax levy. The appellant's role was limited to delivering packets to the recipient, not providing a full courier service. The Tribunal noted that the appellant's activity did not qualify as provision of service on behalf of the client, as required under BAS. The transaction was on a principal to principal basis, and the service cannot be considered as falling under BAS. Thus, this part of the demand was set aside, and the appeal was allowed.

Issue 2:
Regarding the second part of the demand, the appellant received amounts from abroad for courier services, which they claimed as export of service exempt from service tax. The Department contended that since the payment was not in convertible foreign exchange, service tax was leviable. However, the Tribunal found that the appellant received the amounts by adjusting them against payments owed to foreign courier companies. This adjustment constituted receipt in foreign exchange, satisfying the conditions of Notification No.21/2003-ST, which exempts amounts received in convertible foreign exchange from service tax. Therefore, this part of the service tax demand was also set aside, and the appeal was allowed.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, finding in favor of the appellant on both issues.

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