2014 (9) TMI 882 - AT - Service Tax

Valuation - inclusion of reimbursement of expenses - whether the ocean freight, currency adjustment charges, bunkering charges, advance manifest charges collected by the appellant on behalf of the shipping lines can be subjected to levy of service tax - Held that - most of these charges form part of the transaction value in respect of customs matters and therefore, the question of levy of service tax on a customs transaction would not arise at all. If the appellants have collected these charges and remitted the same to the shipping lines, the whole amount received and transmitted cannot be said to be a consideration for the services rendered. What can be levied to service tax is the service rendered by the appellant either as a steamer agent or BAS in respect of collection of freight and other charges and only on the consideration received for the services rendered, service tax can be levied. In this view of the matter, the impugned order is clearly not sustainable in law and the matter has to go back to the adjudicating authority for denovo consideration - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Appeal against Order-in-Original confirming service tax demand for the period October 2007 to March 2012 - Whether ocean freight and related charges collected by the appellant can be subjected to service tax levy.

Analysis:
The appeal and stay petition were directed against Order-in-Original confirming a substantial service tax demand along with penalties for the period October 2007 to March 2012. The appellant, a registered steamer agent, argued that charges collected and remitted to shipping lines, such as ocean freight and other charges, are part of customs value and not consideration for services rendered. The appellant contended that service tax was already paid on consideration for services rendered, and therefore, the entire amount collected should not be subject to service tax. The appellant cited a similar case before the Chennai Bench of the Tribunal where it was held that service tax is not leviable on ocean freight. The appellant requested a stay on the demand and disposal of the appeal.

The Revenue, represented by a Special Consultant, highlighted that despite requests, the appellant failed to provide details of the actual freight collected and remitted, leading to the confirmation of service tax on the entire amount collected from importers/exporters. The Revenue argued that if the appellant had provided the necessary information, the impugned order could have been avoided. The Revenue urged the appellant to furnish all relevant information for proper examination by the department.

After considering both parties' submissions, the Tribunal concluded that the issue was narrow and could be resolved without pre-deposit. The central question was whether charges like ocean freight collected by the appellant on behalf of shipping lines could be subject to service tax. The Tribunal noted that these charges form part of customs transaction value and are not solely consideration for services rendered. Service tax should only be levied on consideration received for services provided by the appellant as a steamer agent. Therefore, the impugned order was deemed legally unsustainable, and the matter was remanded back to the adjudicating authority for fresh consideration. The appellant was directed to cooperate with the department, providing details of charges collected and remitted, consideration received for services rendered, and proof of service tax discharge. The adjudicating authority was instructed to re-examine the issue and issue a speaking order after granting the appellant a proper hearing. Consequently, the appeal was allowed by way of remand, and the stay petition was disposed of.