2018 (7) TMI 262 - AT - Service Tax

Business Auxiliary Services - inclusion of amount received as ocean freight in their taxable value - Held that - The issue whether the amount collected over and above the actual cost incurred as freight charges has been analysed by the tribunal in the case of Bax Global India Ltd. Versus Commissioner of Service Tax 2017 (9) TMI 1264 - CESTAT CHENNAI , where it was held that The Tribunal in 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 - the demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether ocean freight charges are subject to levy of service tax under Business Auxiliary Services.

Analysis:
The case involves the appellants engaged in providing Business Auxiliary Services who collected excess amounts over and above the Ocean Freight without including it in their taxable value for service tax liability. A Show Cause Notice was issued, leading to the original authority confirming the demand and imposing penalties. The appellant contested the issue, citing a previous tribunal decision. The tribunal analyzed the situation, focusing on the nature of ocean freight charges and the transactions involved. The tribunal referred to previous cases to establish that the appellant's activities constituted principal-to-principal transactions, involving the purchase and sale of space rather than acting as an agent for clients. This distinction was crucial in determining the tax liability under Business Auxiliary Services.

The tribunal scrutinized the concept of freight charges in the context of multi-modal transport operations, emphasizing the responsibilities and contractual arrangements of the appellant. It clarified that the appellant's role as a multi-modal transport operator involved assuming responsibility for the performance of contracts and ensuring safe delivery of goods. The tribunal highlighted the distinct nature of the transactions between the appellant, shipping lines, and client-shippers, emphasizing the principal-to-principal relationships and the independent nature of the transactions. This analysis was instrumental in determining that the surplus earned by the appellant was from the purchase and sale of space, not from acting on behalf of clients with space on vessels.

Based on the detailed analysis and legal interpretations, the tribunal concluded that the demand for service tax and penalties could not be sustained. The tribunal set aside the impugned order, allowing the appeal with consequential reliefs. The decision was rooted in the understanding of the appellant's role, contractual relationships, and the nature of transactions involved in the case. The judgment provided clarity on the tax liability concerning ocean freight charges under Business Auxiliary Services, emphasizing the importance of principal-to-principal transactions and the distinct business activities of the appellant in the multi-modal transport sector.