2017 (8) TMI 400 - AT - Service Tax

Commission - Steamer agent service - it is the case of appellant that they are exclusively appointed by the shipping liner for the services to be rendered and is also paid commission - Held that - It is seen that the activity of the appellant as a custom house agent is to provide services to importers/exporters and the disputed activity was only a facility arranged by them to their clients. The appellant has no obligation to arrange transport of cargo through a particular shipping liner. Therefore, the amount received cannot fall within the category of commission so as to be subjected to levy of service tax - appeal allowed - decided in favor of appellant.

Issues:
1. Whether the appellants, registered as Custom House Agents, are liable to pay service tax under the category of Steamer Agent Service for collecting charges from shipping liners.
2. Whether the incentive received by the appellants from shipping liners can be considered as commission subject to service tax.
3. Whether the appellants' activity falls under the definition of steamer agent service despite being registered as custom house agents.

Issue 1:
The case involved the liability of the appellants, registered as Custom House Agents, to pay service tax under the category of Steamer Agent Service for collecting charges from shipping liners. The department issued a show cause notice for the demand of service tax, interest, and penalty. The Commissioner confirmed the demand and imposed a penalty under section 78 of the Finance Act. The appellants contested the demand before the Tribunal.

Analysis:
The appellants argued that they were custom house agents discharging service tax under that category and that the incentive received from shipping liners should not be considered as commission subject to service tax. They emphasized the lack of a service provider and recipient relationship with the shipping liners and cited relevant judgments and circulars to support their position. The Tribunal considered the arguments and held that the demand was unsustainable, setting aside the impugned order and allowing the appeal with consequential relief.

Issue 2:
The question arose whether the incentive received by the appellants from shipping liners could be deemed as commission subject to service tax. The appellants contended that the incentive was not commission since they did not communicate with the shipping liners as steamer agents. They relied on relevant judgments and circulars to support their argument.

Analysis:
The Tribunal examined the nature of the incentive received by the appellants and compared it to the definition of commission for service tax purposes. Relying on the decision in a similar case, the Tribunal held that the brokerage commission paid for booking export cargo could not be taxed under the category of Business Auxiliary Services. The Tribunal found that the appellants were secondary service providers for the shipping lines and, in line with the Board's circular, concluded that the incentive received could not be subjected to service tax.

Issue 3:
The issue revolved around whether the appellants' activity fell within the definition of steamer agent service despite being registered as custom house agents. The department argued that the activity undertaken by the appellants would be covered by the definition of steamer agent service as per the Finance Act.

Analysis:
The Tribunal considered the arguments presented by both sides regarding the nature of the appellants' activity and the definition of a steamer agent. It noted that the appellants' primary role was as custom house agents providing services to importers/exporters, and the disputed activity was merely a facility arranged for their clients. The Tribunal found that the appellants had no obligation to arrange transport through a specific shipping liner, leading to the conclusion that the amount received could not be categorized as commission subject to service tax. Citing previous decisions and the lack of appeal by the department against relevant orders, the Tribunal held in favor of the appellants, setting aside the demand and allowing the appeal with consequential relief.

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