Service Tax Not Leviable On Excess Transportation Charges Recovered From Buyers: CESTAT

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that service tax is not leviable on excess transportation charges recovered from the buyers. The activity of arranging transportation of goods till the dealer's premises cannot be classified under “Business Auxiliary Service” and, therefore, no service tax is payable on transportation related expenses recovered in excess by the assessee from their buyers, stated the Bench of Binu Tamta (Judicial) and P.V. Subba Rao (Technical). In this case, the assessee had executed a Standard Dealership Agreement with all its dealers. For which, the assessee was responsible for engaging the services of transporters for transportation of two wheelers till the premises of the dealers and entered into a Standard Transportation Agreement and also for obtaining insurance of two wheelers during transit and for which they availed an Open Marine Policy. The assessee recovered the freight and insurance charges from its dealers and disclosed the charges separately on the sale invoices. The excess freight and insurance charges retained were treated as profit for the service. On the basis of the enquiry, details were sought by the by the Department regarding the excess receipts of freight and insurance which were duly submitted. A show cause notice was issued to the assessee raising the demand on the freight and insurance charges realised from dealers in excess. On adjudication, the entire demand has been confirmed by the Tribunal. The issue before the Tribunal was whether the transportation or insurance related expenses recovered in excess from the buyers is chargeable to service tax. It was contended by the assessee that once excise duty has been paid on the said transaction, demand of service tax on the same transaction is untenable. The Tribunal observed that the facility of providing transportation of goods to the buyers' premises is an activity related directly to the supply of goods manufactured by the assessee and cannot be linked to any kind of service and, therefore, cannot be made exigible to service tax. The invoice placed on record, clearly reflect the assessable value of the goods, statutory levies and transportation/freight charges. The bench noted that the assessee discharged the excise duty liability on excess freight and insurance charges, consequently, the levy of service tax is unsustainable. In view of the above, the Tribunal allowed the appeal. Counsel for Appellant/ Assessee: B.L. Narsimhan, Shri Shivam Bansal Counsel for Respondent/ Department: Jaya Kumari Case Title: M/s. Honda Motorcycle and Scooter India Pvt. Ltd. v. Commissioner of Service Tax Case Number: Service Tax Appeal No. 51587 of 2017 Click Here To Read/Download The Order

Service Tax Not Leviable On Excess Transportation Charges Recovered From Buyers: CESTAT

Mehak Dhiman

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