Order Date – 11 January 2024

Parties: M/s.Veera Creations Vs The Commissioner of GST & Central Excise

Facts –

• The Appellant, M/s. Veera Creations, is engaged in manufacture and export of knitted garments. The appellant get their orders for supply of goods to M/s. Bonprix, Germany through M/s. JPS Trading, Dubai. The appellant receives payments from their overseas buyer through M/s. JPS Trading after the deductions of bonus, inspection charges and recycling compensation by the buyer.
• A show cause notice was issued the deductions are classifiable under the head “Business Auxiliary Service” and “Technical Inspection and Certification Services” and is taxable at the recipient’s end and the appellant is providing GTA services by transporting goods by road from and to their factory.

Issue –

• Whether the appellant is liable to pay service tax under ‘Business Auxiliary Service’, ‘Technical Inspection and Certification Service’, and ‘GTA Service’?

Order –

• The Tribunal observed that  garments are sold by the appellant to M/s. Bonprix, Germany. M/s. JPS Trading, Dubai has played a role of middleman in making arrangements. The quality test is done by M/s .Fashion Force in India. According to the department, it is an agent of M/s. JPS Trading, Dubai. However, there is no payment made by the appellant to M/s. Fashion Force.
• Thus, it cannot be said that the deductions made in the invoices raised in the name of M/s. Bonprix, Germany is a payment made to Fashion Force, Tiruppur. Hence held that the demand raised under ‘BAS’, ‘Technical Inspection and Certification Service’ is without any factual or legal basis and requires to be set aside.
• In regard to the demand raised under GTA service, the authorities below have extended the benefit of abatement after the period 1.3.2008. The show cause notice has been issued invoking the extended period. Even if the appellant paid tax on GTA services, the appellant would be eligible for availing cenvat credit of the tax paid. The entire situation is revenue-neutral. In such situation, the extended period cannot be invoked as decided in the case of Nirlon Ltd. Vs CCE – 2015 (320) ELT 22 (SC).
• In the result, the impugned order is modified to the extent of setting aside the demand, interest and penalties under ‘Business Auxiliary Service’, ‘Technical Inspection and Certification Services’. The demand, interest and penalties in regard to ‘GTA Service’ is set aside for the extended period.
• The details as to whether GTA services were used only for export is not before the Tribunal. Therefore, the appellant is liable to pay the tax on GTA services for the normal period along with interest. For the same reasons of revenue neutral situation, the penalties are set aside entirely