TaxTMI 
TaxTMI 
2022 (5) TMI 985
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....ion issued under section 93 of Finance Act, 1944. 2. The genesis of the dispute, as well as the concluding of the proceedings, is founded upon the records maintained by the appellant which, inter alia, included receipts from the overseas entity that, in the accounts, was disaggregated to correspond with the stages involved. According to tax authorities, the value corresponding to the leg within the country, from out of the consolidated consideration, was, owing to service being performed on goods while on the soil of India, liable to tax and, not having been discharged, was recoverable under the authority of section 73 of Finance Act, 1994. Per contra, the appellant contends that the composite engagement to deliver goods outside the country, for which consideration was received from the recipient of services located outside India, is inextricably linked with export of goods and, therefore, performed outside the 'taxable territory' envisaged under Finance Act, 1994. Both sides claim coverage under different rules of the Place of Provision of Service Rules, 2012. 3. Learned Counsel for appellant asserts that the activity lies squarely beyond intendment of tax with the goods involve....
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....oods in India which is covered by rule 4 of Place of Provision of Service Rules, 2012. He also pointed out that the adjudicating authority had arrived at this conclusion after detailed scrutiny of the 'Logistics Service Partnership Agreement' of February 2011 in which it was noticed that the contract intended totality of 'cargo handling' in their respective territories only and sufficed to hold that 'service' of the appellant was rendered in India with the activities at the destination being the responsibility of the overseas entity. 6. The impugned order has confirmed tax liability of Rs.2,25,42,181 under section 73 of Finance Act, 1994, along with applicable interest under section 75 of Finance Act, 1994, besides imposing penalty under section 77 and 78 of Finance Act, 1994. The appellant does not dispute that they provide 'service', within the meaning of section 65B (44) of Finance Act, 1944, comprising, as it does, of activity carried out by them for another but controverts the findings in the impugned order inasmuch as the 'other' is the overseas entity from whom 'consideration' is received for 'transportation' and, therefore, 'export' within the ambit of rule 6A of Service T....
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....ions in Export of Service Rules, 2005 was excluded from tax under the authority of section 93 of Finance Act, 1994. As a general rule, tax was exempted on all transactions in which the 'recipient' was located outside India. This, however, was not applicable to transactions in which immoveable property or moveable goods belonging to, or provided by, 'recipient' was intrinsic to rendering of 'taxable services' and, in such situations, exemption was extended if immoveable property was located outside India or if moveable goods were worked upon outside India. 9. The continuance of that privilege was reflected, by adaptation for the new paradigm of tax on 'services' in place of tax on 'enumerated services', through a mechanism for ascertaining of provision of service outside the 'taxable territory' to which the levy did not extend. In the successor 'negative list' regime that did away with the enumerated list of 'taxable services', such categorization was inoperable and rendering of 'service' within 'taxable territory', on the other hand, restricts leviability to such as conform to that condition. Unlike goods, cross-border transaction in services cannot be geographically pinpointed ex....
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....ces Rules, 2012 may not serve to confer jurisdiction becomes increasingly obvious. 15. Accordingly, we can infer that the location of performance of service in respect of goods is not an abstract, absolute expression for fastening tax liability on services that involve goods in some way; for that, Rule 3 would have sufficed. A contingency that is not amenable to Rule 3 has been foreseen and remedied by Rule 4 and in the process, the sovereign jurisdiction to tax is asserted. It is, therefore, not by the specific word or phrase in Rule 4(1) of Place of Provision of Services Rules, 2012 that the taxability is to be determined but from the mischief effect intended to be plugged. It is obviously not intended to tax any activity rendered on goods as to alter its form because that would be covered by excise on manufacture or be afforded privileges available to merchandise trade. The provision itself excludes goods imported temporarily for repairs but that does not, ipso facto, exempt goods imported temporarily for repairs from taxability which would, by default, be predicated by the intent in Rule 3. Consequently, a recipient in India would be liable to tax on such temporary imports fo....
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....iguing as the location of provider and recipient of 'service', identified by the original authority suffices, in the context of section 65B (44) and section 65B (51) of Finance Act, 1994, to place the activity outside 'taxable territory' insofar as the levy under Finance Act, 1994 is concerned, had to be discredited. 12. To overcome that obvious conclusion, the adjudicating authority has complicated the transaction set by assigning the role of agent of M/s ATA Freightline Ltd, New York to the appellant entrusted with the charge of taking delivery of the related goods made available by the exporter for rendering service. Besides that artifice, it was further held that the 'ex works' service terminated at the port of export which, in the context of the statutory provision predicated on 'goods', is tantamount to erasure of existence of goods. Both these are presumptions of the adjudicating authority without any evidence to render these as acceptable conclusions and far removed from the reality of a composite transaction for carriage of goods from within India to a place outside India. 13. If such truncation of transaction at the port/airport of shipment was legally, and logically, t....
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.... may be noted that in terms of rule 10 of the Place of Provision of Services Rules 2012, (hereinafter referred to as 'POPS Rules, 2012', for brevity) the place of provision of the service of transportation of goods by air/sea, other than by mail or courier, is the destination of the goods. It follows that the place of provision of the service of transportation of goods by air/sea from a place in India to a place outside India, will be a place outside the taxable territory and hence not liable to service tax. The provisions of rule 9 of the POPS Rules, 2012, should also be kept in mind wherein the place of provision of intermediary services is the location of the service provider. An intermediary has been defined, inter alia, in rule 2(f) of the POPS Rules, 2012, as one who arranges or facilitates the provision of a service or a supply of goods between two or more persons, but does not include a person who provides the main service or supplies the goods on his own account. The contents of the succeeding paragraphs flow from the application of these two rules. 2.1 The freight forwarders may deal with the exporters as an agent of an airline/carrier/ocean liner, as one who me....
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....titute for determination that the service rendered by the appellant was legally, and logically, amenable to such aggregation. 15. The question that arises, even assuming that the accounting treatment of 'consideration' is amenable to geographical segregation as markers of a series of activities that make up 'service', is the scope for disaggregation of 'service' without ascertainment of conformity of each of the segments with '(44) ........ any activity carried out by a person for another for consideration and includes ....' in section 65B of Finance Act, 1994 which is a pre-requisite for separate taxability, and exemption, under the authority of section 66B of Finance Act, 1944. The crux of the determination of tax liability in the impugned order is the rendering of 'service' between the premises of exporter and loading on 'foreign going' vessel/aircraft which, according to the adjudicating authority, is implicit in the attribution of charges for that stage of transport. However, in terms of the definition, 'service' is not founded upon 'consideration' but is activity carried out by a person for another for consideration; impliedly, without the 'another' there can be no 'servi....