Appellants not liable for service tax on transportation charges reimbursed to suppliers.

The court found that the appellants were not liable for service tax on transportation charges reimbursed to Nepalese suppliers. The court determined that the appellants did not receive Goods Transport Agency (GTA) service as they only reimbursed the freight expenses to the suppliers, who were responsible for engaging transporters and paying for transportation under F.O.R. basis contracts. The court waived the requirement of pre-deposit for the appeals, stayed the recovery, and allowed the stay petitions.

---

---

Issues: Determination of liability for service tax on transportation charges reimbursed by appellants to Nepalese suppliers.

Analysis:
The appellants, who are manufacturers of Grey Fabrics, purchased yarn from Nepalese manufacturers on F.O.R. basis. The Nepalese manufacturers supplied the yarn to the appellants and arranged transportation to the appellants' premises, paying the freight to the transporters. The Department contended that the appellants, by reimbursing the freight charges to the suppliers, should be considered recipients of Goods Transport Agency (GTA) service and thus liable to pay service tax on the transportation charges. Consequently, show cause notices were issued for recovery of service tax, interest, and penalty. The Asstt. Commissioner confirmed the service tax demands, which were upheld by the Commissioner (Appeals), leading to the filing of the present appeals along with stay applications.

The advocate for the appellants argued that the appellants did not receive GTA service as they only reimbursed the freight expenses to the suppliers. He emphasized that the contracts with the Nepalese suppliers were on F.O.R. basis, making the suppliers responsible for engaging transporters and paying for transportation. Therefore, the appellants should not be considered recipients of GTA service. On the other hand, the learned DR contended that the suppliers acted as agents of the appellants, making the appellants recipients of GTA service and liable for service tax.

After considering the submissions and records, the Member (Technical) found that the appellants merely reimbursed the freight expenses to the suppliers. Since the contracts were on F.O.R. basis, with the suppliers engaging transporters and making payments, the appellants could not be deemed recipients of GTA service. Consequently, the requirement of pre-deposit of demand, interest, and penalty was waived for the hearing of the appeals, and the recovery was stayed. The stay petitions were allowed, and the order was dictated in the open Court by the Member (Technical).

---