Double Taxation - Where Customs Transaction ends and Service Transaction begins
IN United Shippers Ltd. vs. Commissioner of Central Excise, Thane-II - , it was observed that when the goods are being transported by the barges from the mother vessel to the jetty onshore, that activity is part of the import transaction of bringing the goods into India from a place outside India; that question of rendering any service in respect of such goods by way of cargo handling or otherwise can take place only after the customs transaction is completed; therefore for the levy of Service Tax, the transportation by barges from the mother vessel to the jetty on-shore, would not arise at all since the activity is part of the import transaction leviable to import duty.
Tribunal in Shri Atul Kaushik & others vs. Commissioner of Customs (Export), New Delhi - held that there is no provision warranting exclusion from the assessable value for customs purposes, on the ground that service tax has become chargeable on such license fee under a different statute.
There is a general opinion among many that there cannot be double taxation. They believe that Service Tax and Excise duty or Service Tax and Customs duty cannot be collected for the same transaction. There is actually no legal backing for this opinion.
In the case of Imagic Creative Private Ltd - 2008-TIOL-04-SC-VAT., the Supreme Court laid down the ratio that payment of service tax and VAT are mutually exclusive. The Tribunal in Atul Kaushik observed that the said ratio laid down by the Supreme Court cannot be extrapolated to mean that customs duty and service tax are also mutually exclusive. The Tribunal further observed, "No constitutional provision is brought to our notice inhibiting levy of taxes under different statutes on the same transactions. It is axiomatic that the same transaction may inhere distinct taxable events, exigible to different taxes. The only question is whether demand of tax is sustainable under the particular statute.
In a recent case before the Authority for Advance Rulings, the question raised by the applicant was:
While discharging the foreign C & F Agent raised composite bill/invoice liability, which portion of amount will attract Service Tax obligation under reverse charge mechanism?
The applicant submitted that a foreign C&F Agent would be incurring the expenses on behalf of the applicant with respect to freight, insurance, loading, unloading and handling charges of goods, etc. proposed to be imported. Further, all these expenses incurred are included in the valuation of goods as per Section 14 of the Customs Act, 1962 for the purpose of charging Customs duty. Therefore, charging Service Tax on said component would tantamount to double taxation.
But the advocate of the applicant (candidly) admitted that there is no statute to indicate that if customs duty is chargeable, Service Tax is not leviable on the same component.
So, the plea of double taxation failed.
The AAR ruled:
As per Notification No. 30/2012-ST dated 20.06.2012, the taxable services provided or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory, is liable to Service Tax and payable 100% by the person receiving the service. In this case, foreign C&F Agent would be located outside India and the applicant, who is recipient of service, located in India. The service to be provided is in respect of freight, insurance, loading, unloading and handling charges of goods etc. Therefore, as per Notification No. 30/2012-ST dated 20.06.2012, Service Tax would be payable by the applicant i.e., recipient of service.
As per Rule 5(1) of Service Tax (Determination of Value) Rules, 2006, where any expenditure or costs are incurred by the Service provider in the course of providing service, all such expenditure or costs shall be included in the value for the purpose of charging Service Tax on said service. Further, Rule 5(2) ibid inter alia envisages that the expenditure or costs incurred by the service provider as a pure agent of recipient of service shall be excluded from the value of taxable service.
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