Whether pre-shipment inspection of goods before export leviable to service tax under BAS?

PJ/Case Law/2013-14/1969

Case:- PRIYA MARINE PRODUCTS Vs COMMISSIONER OF C. EX., BHAVNAGAR

Citation:- 2013 (30) S.T.R. 464 (Tri. - Ahmd.)

Brief facts:- This stay petition was filed for the waiver of pre-deposit of Service Tax of Rs. 14,54,629/-, interest thereof and equivalent amount of penalty and various penalties. The above said amounts had been confirmed by the adjudicating authority and upheld by the first appellate authority on the ground that the appellant, during the material period - 2004-05 to 2008-09 had provided business auxiliary services.

Appellant’s contentions:- Ld. C.A. took through the agreement and the order-in-appeal. He submitted that the appellant hereunder was providing services viz. procurement of frozen seafood from India, pre-shipment inspection before export of the goods; it was his submission that the export was undertaken by him on the specific appointment of foreign parties and he visited the facilities where goods were packed. He drew out attention to Board’s Circular dated 24-2-2009 and submitted that the goods were falling under the category of export of services and benefits of services rendered by the appellant were accrued outside India i.e. to a foreign buyer. It was also his submission that Board’s circular had been considered by the Coordinate Bench in the case of Nipuna Services Ltd. - 2009 (14)S.T.R.706 (Tri. - Bang.)also held that these services could be considered as export of services.

Respondent’s contentions:- Ld. DR on the other hand drew attention to the very same agreement. He submitted that the said agreement specifically stated that the appellant was appointed as an agent and besides inspection should also extend help for loading. He specifically drew attention to the various clauses of the said agreement.
Reasoning of judgment:- After careful consideration of the submissions made by both sides at length, the Bench found that the issue involved in this case was regarding the Service Tax liability on the appellant under the category of business auxiliary services. It was the undisputed that the services rendered by the appellant were on specific appointment of him by the foreign buyers. It was also undisputed that the acceptance of the finished goods i.e. processed foods was done only on an approval/inspection done by the appellant. At this juncture, they found that prima facie, the services rendered by the appellant may get covered under BAS, but as per the Board’s Circular dated 24-2-2009, which specifically talks about the non-taxing of services, even when all the relevant activities though taking place in India, benefits of these services were accrued outside India. They found that the appellant had made out a prima facie case for the waiver of the pre-deposit of the amounts involved. Accordingly, application for the waiver of pre-deposit of the amounts involved was allowed and recovery thereof stayed till the disposal of appeal.

Decision:- Application allowed.

Comment:- The analogy drawn from the case is that as per board circular, it has been clarified that the services rendered by the appellant would not be taxable when all the relevant activities are taking place in India but the benefit of the services are accrued outside India as it would amount to export of services. Consequently, the pre-shipment inspection services of goods before their export provided by the appellant would primarily not be leviable to service tax.

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PJ/Case Law/2013-14/1969

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