2018 (6) TMI 723 - AT - Service Tax

Business Auxiliary Service - activity of booking space for cargo transportation in airlines/ship - demand is made alleging that the appellant had received consideration for pre-booking of space in airlines/shipping lines - Held that - The issue is decided in the case of GREENWICH MERIDIAN LOGISTICS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI 2016 (4) TMI 547 - CESTAT MUMBAI , where it was held that The notional surplus earned thereby arises from purchases and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) ibid will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed - demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether the revenue generated by charging extra fees for cargo transportation falls under Business Auxiliary Service.

Analysis:

1. The case involved the appellant, engaged in providing Custom House Agent Service and other services, who were registered with the service tax department. During an audit, it was found that the appellant booked space for cargo transportation with airlines/ship and charged their customers extra fees for freight. The department viewed this revenue as falling under Business Auxiliary Service, leading to a show cause notice for service tax, interest, and penalties.

2. The appellant argued that the issue was settled in previous tribunal decisions like BAS Global India Ltd. and Greenwich Meridian Logistics (I) Pvt. Ltd. The Tribunal considered the nature of the transactions, emphasizing the appellant's role as a multi-modal transport operator under the Multi-modal Transportation of Goods Act, 1993. The appellant took responsibility for the safety of goods, issued multi-modal bills of lading, and contracted with carriers for transportation by land, sea, or air.

3. The Tribunal noted that the appellant's contracts with carriers were distinct principal-to-principal transactions, not involving the consignors directly. The appellant procured space from shipping lines, assuming the risk of non-usage, and then allocated this space to client-shippers at negotiated rates. The revenue earned was from the purchase and sale of space, not from acting as an agent for clients with existing space on vessels.

4. Relying on the analysis of previous decisions, the Tribunal concluded that the demand for service tax could not be sustained. The impugned order was set aside, and the appeal was allowed with any consequential relief. The operative portion of the order was pronounced in open court, providing a favorable outcome for the appellant based on the interpretation of their role as a multi-modal transport operator and the nature of their transactions.