Service tax is not applicable on excess transportation charges collected from buyers, as cited by The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT).
The activity of arranging transportation of goods to the dealer’s premises cannot be categorized under “Business Auxiliary Service” and, therefore, no service tax is liable to get filed on transportation-related expenses recovered in excess by the taxpayer from their buyers, the Bench of Binu Tamta (Judicial) and P.V. Subba Rao (Technical) stated.
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The taxpayer implemented a Standard Dealership Agreement with all its dealers. For which the taxpayer was obligated to engage the services of transporters for transportation of two-wheelers to the premises of the dealers and entered into a Standard Transportation Agreement, and also for receiving insurance of two-wheelers during transit, and for which they availed an Open Marine Policy.
The taxpayer recovered the freight and insurance charges from its dealers and revealed the charges separately on the sales invoices. The excess freight and insurance charges included were treated as profit for the service. Based on the enquiry, details were sought by the Department concerning the excess receipts of freight and insurance which were duly submitted.
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A show cause notice was furnished before the taxpayer asked for the demand on the freight and insurance charges realised from dealers in excess. The whole demand for adjudication has been validated by the tribunal.
The issue before the Tribunal was whether the transportation or insurance pertinent expenses recovered over the buyers’ is leviable to service tax.
The assessee argued that once excise duty has been paid on the said transaction, the demand for service tax on the same transaction is untenable.
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It was noted by the Tribunal that the facility to furnish the transportation of goods to the buyers’ premises is an activity pertinent to the supply of goods manufactured by the taxpayer and cannot be associated with any kind of service and, hence, cannot be made exigible to service tax. The invoice placed on record clearly shows the assessable value of the goods, statutory levies and transportation/freight charges.
Benchmarked that the taxpayer released the excise duty liability on excess freight and insurance charges, therefore, the levy of service tax is not endurable.
The tribunal in the aforesaid view has permitted the plea.
| Case Title | M/s. Honda Motorcycle and Scooter India Pvt. Ltd. vs. Commissioner of Service Tax |
| Appeal No. | 51587 of 2017 |
| Date | 18.03.2025 |
| Counsel For Appellant | Shri B.L. Narsimhan, Shri Shivam Bansal and Shri Dhruv Anand |
| Counsel For Respondent | Ms. Jaya Kumari |
| Delhi CESTAT | Read Order |
