XYZ Ltd. engaged in processing of Raw Shrimps (Fish) .Such company procures from local harvesting parties and exports accordingly after processing.Now, after packaging of such frozen shripms, containers are being loaded and transported by road by cargo carrier company (say, ABC LTD.) carries such goods upto the port for shipment.
ABC Ltd. does not charge Service tax on such freight charges.My client also does not provide service tax under reverse charge mechanism. Contention of XYZ Ltd. is that as frozen shrimp is Agricultural Produce and service rendered in relation to export is outside of applicability of service tax.
in such context, I found two issues involved.. One is applicability of Service Tax and another Exemption related issues.
1) Applicability in this case:
As Service has been rendered inside India(upto the port), Service tax will be levied on such frieght charges.
2) Exemption related issues:
Yes, it is correct that raw Shrimps (fish) falls within the definition of Agricultural Produce, but so far this case is concerned, such shrimps are not sold to "PRIMARY MARKET" as it is for exportation only. Moreover processing of raw shrimps into frozen shrimps are being done as per requirement of foreign importer.Hence this is a case of MANUFACTURE and any process involved to make MARKETABLE of such finished product (Freight charges from factory to port) is Subject to service tax and GTA service will be attrackted.
Looking for your expert opinion.
Thanks,
CA.Suman Saha
CAclubindia
