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2017 (9) TMI 1264 - AT - Service TaxClassification of services - Valuation - reimbursable expenses - includibility - documentation charges, cartage, break bulk charges, spread share charges, handling charges, handling charges, miscellaneous charges, etc - whether services performed by appellant would fall under the ambit of Custom House Agent s Service (CHA) and Business Auxiliary Service (BAS)? Held that - on the same issue, in appellant s own case, BAX GLOBAL INDIA LTD. Versus COMMISSIONER OF SERVICE TAX 2007 (10) TMI 132 - CESTAT, BANGALORE the Tribunal held that amount collected by CHA like cartage revenue, MSIL/JWG charges, due carrier, documentation charges etc. are for services rendered by third party and the appellant initially make payment for the activities on behalf of the client and later collected the amount from the client and that these are actually reimbursable expenses and not relating to the CHA activities. Even in respect of air freight, the Tribunal held that these charges cannot be said to be related to the activities of CHA. Business Auxiliary Services - whether free booking of space in shipping liners would amount to BAS or not? - Held that - The appellant pre-books the slots even before they get an order from their exporter or other client. It is not the case that the appellants are doing on behalf of client only after they get an export order - The Tribunal in RE Greenwich Meridian Logistics (I) Pvt. Ltd. Vs CST Mumbai 2016 (4) TMI 547 - CESTAT MUMBAI held that while notional surplus was earned from purchase and sale of space however that it was not by acting for the client. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Demand of Service Tax under Custom House Agent (CHA) Services. 2. Demand of Service Tax under Business Auxiliary Services (BAS). Issue-wise Detailed Analysis: 1. Demand of Service Tax under Custom House Agent (CHA) Services: The Appellant is engaged in Custom House Agent (CHA) services and pays service tax on the agency fee. However, the department has demanded service tax on additional charges such as documentation, cartage, break bulk, spread share, handling, management, and miscellaneous charges, arguing that these are not mere reimbursements but include substantial mark-ups, thus constituting income for the Appellant. The Appellant argued that: - Service tax is already paid on CHA agency services. - The additional charges do not relate to the taxable service of CHA but are reimbursements for services provided by third parties. - The CBEC Circular No. 43/1/97 dated 06.06.97 clarified that only agency commissions are liable to tax under CHA services. - Similar proceedings in the Appellant's Bangalore office were set aside by the Tribunal, which held that such charges are not related to CHA services and cannot be subjected to service tax. The Tribunal noted that the adjudicating authority had acknowledged that reimbursable expenses should not be taxed but still confirmed the demand based on the income shown in the trial balance. The Tribunal found this contradictory and referenced its own previous decision in the Appellant's case, Bax Global India Ltd., which held that such charges are reimbursable expenses and not related to CHA activities. 2. Demand of Service Tax under Business Auxiliary Services (BAS): The Appellant purchases space from airlines and shipping lines and sells it to exporters, with a markup over the actual freight. The department contended that this activity falls under BAS as it involves procurement of goods or services, which are inputs for the client. The Appellant argued that: - They merely collect and remit freight charges to airlines/shipping liners. - Air freight for export cargo and ocean freight are not taxable services. - The markup collected does not alter the nature of the services. - Pre-booking of container space is an independent business activity, and any profit from this is not taxable under BAS. The Tribunal referenced its decision in Greenwich Meridian Logistics (I) Pvt. Ltd., which held that the notional surplus from purchasing and selling space is not by acting for a client but as a principal-to-principal transaction. Similarly, in DHL Lemuir Logistics Pvt. Ltd., the Tribunal found that pre-booking of slots and selling them to customers does not conform to the definition of BAS and is not liable to tax. Conclusion: The Tribunal found no cogent reason to deviate from the established ratio in the Appellant's own case and similar cases. The impugned order was set aside, and the appeal was allowed with consequential benefits as per law. Pronounced in court on 18.09.2017.
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