2015 (8) TMI 638 - AT - Service Tax

Classification of service - Business Auxiliary service or Business Support service - whether the expenses charged directly from customers such as Bill of Lading (B/L) reissue charges, switch B/L charges, B/L surrender charges, advance cargo declaration charges, administration charges on stamp duty, amendment charges, check dishonour charges, destination documents fees, late B/L charges are leviable to service tax under the Business Auxiliary Services - Held that - The appellant provides end-to-end solutions to the customers and therefore, all charges including those directly paid by customers to the appellant are leviable to service tax. We cannot agree with this contention. The appellant is paying service tax under Steamer Agent services on all activities including some documentation charges and all such charges are credited to the account of the Principal as per the Agency Agreement. The remaining charges i.e. those on which service tax demand has been raised relate to activities performed by the appellant independently for their customers. The appellant did not remit these charges to the Principal. We find nothing in the Agreement which states that the appellant cannot provide such service and cannot receive charges from the customers for such activities. Therefore, we conclude that these activities constitute service provided directly to the customer and do not constitute services provided on behalf of the Principal. Hence, the services would not fall under the category of BAS during the period of dispute - there was bonafide confusion in the mind of assesses about taxability of documentation services during the period prior to 16.6.2005. Having set aside the demand of tax, the penalties are also set aside as the duty was paid for period after 16.6.2005, that is, before the issue of show cause notice - Decided in favour of assessee.

Summary

Issues:
1. Whether expenses charged directly from customers are leviable to service tax under Business Auxiliary Services.

Analysis:
The appellant appealed against an order demanding Service Tax of Rs. 1,24,87,065/- for the period July 2003 - February 2006, with penalties and interest. The main issue was whether charges like B/L reissue, switch B/L, administration charges, etc., directly from customers are taxable under Business Auxiliary Services (BAS).

The appellant had an Agency Agreement with an International Shipping Company, providing various services. The Revenue argued that the charges in question were customer management services under BAS. They relied on a CBEC Circular and the Agency Agreement's Balance Sheets. The Ld. Counsel argued that services already taxed were covered, and the disputed charges were not remitted to the Principal. They cited a Tribunal decision and dropped proceedings by the Mumbai Service Tax Commissionerate on a similar issue.

The Tribunal noted flaws in the proceedings as the specific BAS clause was not mentioned. The Revenue sought tax under customer care services (Clause iii). However, the charges were directly paid by customers, not on behalf of the Principal. The Tribunal found no evidence of remittance to the Principal for these charges, concluding they were not BAS but could be considered under the amended definition post-June 2005. Revenue's stand lacked justification and showed contradictions.

The Tribunal set aside the tax demand pre-June 2005 due to genuine confusion, penalties being waived as tax was paid post-June 2005. The appeal was allowed, and the impugned order was set aside accordingly.