2013 (9) TMI 549 - AT - Service Tax

Business Auxiliary Service or Not - multi-modal transporter - The applicant paid service tax under the head of Business Support Service and While rendering such service, they charged to their clients under various headings for which they were not paying any service tax - During the relevant period transportation by sea was not taxable - It is far-fetched to tax such a substantial activity as part of the Business Support Service and the issue had been dealt with in stay orders already passed - Held that - The main service namely ocean freight as Business Support Service had classified the service under Business Auxiliary Service - the order goes beyond the scope of the Show Cause Notices - during the relevant period, there was no entry in the Finance Act, 1994 for taxing transportation by sea - Rule 5 of the Service Tax (Determination of Value) Rules, which was initially proposed in the Show Cause Notices have been struck down. Whether the present case was on the same footing as that of M/s. Leaap International Pvt. Ltd. Vs Commissioner of Service Tax, Chennai 2013 (5) TMI 112 - MADRAS HIGH COURT - It was argued that the appellant was issuing the Bill of Lading as a multimodal transport operator and such aspect was not considered in the case of M/s Leaap International - When Bill of Lading was issued and the applicant was acting in a joint activity - they were entitled to their profit and such an activity cannot be considered as procurement of service for exporter/importer - Such submissions was not clearly coming in the reply to the Show Cause Notice and in the Order-in-Original and these facts needed to be decided at the time of hearing of the appeal. Waiver of Pre-deposit - At the prima facie stage 75 Lakhs were ordered to be submitted as Pre-deposit upon such submission rest of the duty to be waived till the disposal stay granted partly.

Summary

Issues:
Classification of services under "Business Support Service" and "Business Auxiliary Service" for various charges related to transportation services provided by a multi-modal transporter. Taxability of ocean freight charges under service tax laws.

Analysis:
1. The applicant, a multi-modal transporter, provides services for importing and exporting goods, issuing Bill of Lading, and transporting goods to and from Inland Container Depots (ICD) and Container Freight Stations (CFS). The applicant charges various fees like Terminal Handling Charges, Transportation Cost, Customs Clearance Charges, etc. The dispute arises regarding the classification of these charges for service tax purposes.

2. The Revenue issued Show Cause Notices alleging tax short-paid on ocean freight charges, considering them as reimbursable expenses forming part of "Business Support Service." The applicant contests this classification, arguing that ocean freight should not be taxed as it was not covered under the Finance Act during the relevant period. Additionally, the applicant relies on the Delhi High Court's decision striking down Rule 5 of the Service Tax (Determination of Value) Rules, which was proposed in the Show Cause Notices.

3. The main contention is whether the ocean freight charges should be classified under "Business Support Service" or "Business Auxiliary Service." The Revenue argues that the difference between the amount charged to customers and paid to shipping lines represents a cost for procuring the services, justifying classification under "Business Auxiliary Service." The applicant emphasizes that the Bill of Lading issuance makes them a joint operator entitled to profit, not merely a service procurer. The Tribunal finds discrepancies in the submissions and orders a pre-deposit for further examination during the appeal hearing.

4. The Tribunal notes that transportation by sea was not taxable during the relevant period and questions the classification of ocean freight charges. It directs a pre-deposit of Rs.75 lakhs for a detailed hearing to clarify the nature of services provided by the applicant and the taxability of various charges. The decision aims to address the classification issue and ensure a fair resolution based on the specific facts and legal provisions involved.