2013 (6) TMI 292 - AT - Service Tax

Services rendered to SEZ units - appellants have been claiming exemption under Notification No.4/2004-ST, dated 31.03.2004 - Revenue submits that the appellant is providing logistics services and transportation of goods by sea is only one component of various activities required for providing such service. He argues that the service is appropriately classified as Business Support Service - Held that - As regards ocean freight, it canoot be said as how it can be classified as Business Support Service and subject to levy of service tax. In the matter of services rendered to the SEZ the matter is to be looked into with reference to each of the services and how it was utilized and requires detailed examination. So it is appropriate to call for a pre-deposit of Rs.25 lakhs on this issue to be deposited within a period of six weeks from today and report compliance on 13.03.2013.

Summary

Issues:
1. Classification of ocean freight as "Business Support Service" for levy of service tax.
2. Exemption under Notification No.4/2004-ST for services rendered to SEZ units.

Analysis:
1. Classification of Ocean Freight:
The case involves two stay petitions arising from the same impugned order but concerning demands for different periods. The applicant, a freight forwarder, provided various services related to goods exported and imported. The revenue contended that the freight amount collected from customers should be taxed under "Business Support Service." The applicant argued that transportation of goods by sea was not taxable, as they did not undertake such activities in India and merely collected money for shipping lines. Citing precedent decisions, the applicant requested a waiver of pre-deposit for this issue. The Tribunal agreed, stating that ocean freight cannot be classified as "Business Support Service" based on previous rulings. Therefore, no pre-deposit of dues was required for this issue.

2. Exemption for Services to SEZ Units:
In Appeal No.417/2010, a demand of Rs.53,92,244/- was raised for services to SEZ units. The appellant claimed exemption under Notification No.4/2004-ST. The Revenue argued that the services provided were part of an integral logistics service, making them taxable as "Business Support Service." Additionally, the Revenue contended that the services were consumed outside the SEZ, making them ineligible for exemption. Referring to a previous decision, the Revenue asserted that the exemption could not be extended in such cases. The Tribunal considered both arguments and decided that a detailed examination was necessary to determine if the services were consumed in the SEZ or outside. Consequently, a pre-deposit of Rs.25 lakhs was ordered for this issue, with the appellant directed to comply within six weeks. The balance dues were waived for appeal admission, with a stay on collection during the appeal's pendency.

In conclusion, the Tribunal ruled in favor of the appellant regarding the classification of ocean freight, waiving the pre-deposit requirement. However, for services provided to SEZ units, a pre-deposit of Rs.25 lakhs was mandated for further examination on the consumption location of the services.