Tribunal rules in favor of courier agency on Service Tax liability under Reverse Charge Mechanism

The Tribunal ruled in favor of the courier agency, holding that the services received from foreign service providers/co-loaders were not liable to Service Tax under the 'Reverse charge mechanism.' The decision was based on a Circular of CBEC and previous judgments, noting that the issue was revenue neutral as the agency had already paid tax on the gross amount received. The Tribunal set aside the impugned order against the agency, granting consequential benefits if any.

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Issues:
1. Liability of a courier agency to pay Service Tax on input services received from foreign service providers/co-loaders under the 'Reverse charge mechanism' from May 2006 to August 2007.

Analysis:
The appellant, a courier agency providing courier services, was paying Service Tax on the gross amount received from service receivers. The Revenue contended that the appellant should pay Service Tax on the input services received in India from foreign service providers/co-loaders under the 'Reverse charge mechanism' for the period from May 2006 to August 2007. The appellant availed services of overseas agencies, their group companies, for receiving and distributing consignments meant for delivery overseas.

The appellant argued that the issue was settled as per Circular of CBEC dated 31.10.1996, F.No. 341/43/96, which stated that charges of co-loaders to courier agencies were recovered by the agencies from customers, and Service Tax was paid on the gross amount. Referring to previous decisions, the appellant contended that services received by the courier agency from co-loaders were not liable to Service Tax, especially when provided by co-loaders outside India. The Tribunal in earlier cases had held that such activities were beyond the territorial jurisdiction of Service Tax Law and not taxable.

The Tribunal, considering the Circular and precedent decisions, held in favor of the appellant. It was noted that the issue was revenue neutral as the appellant was entitled to input service credit and had already paid tax on the gross amount. Therefore, the part of the amount incurred for payment to co-loader (overseas) could not be taxed again. The appeal was allowed, and the impugned order against the appellant was set aside, granting consequential benefits if any.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the services received by the courier agency from foreign service providers/co-loaders were not liable to Service Tax under the 'Reverse charge mechanism.' The decision was based on the Circular of CBEC and previous judgments, emphasizing that the issue was revenue neutral as the appellant had already paid tax on the gross amount received.

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