2019 (3) TMI 114 - AT - Service Tax

Classification of services - Business auxiliary services or not - appellants were booking space for cargo transportations in airlines/ships and paid the charges for the same. While charging their customers towards such freight charges, the appellants bill/collect extra charges in excess of the charges paid to the airlines/ships. Demand of ₹ 1,92,04,675/- and ₹ 36,00,891/- with interest payable under the category of Business Auxiliary Service - Held that - The Tribunal in the case of M/s. Freight Systems (India) Pvt. Ltd. Vs. Commissioner of G.S.T. & Central Excise, Chennai South Commissionerate 2018 (7) TMI 333 - CESTAT CHENNAI , held that the demand of service tax on such freight charges under Business Auxiliary Services is unjustified - demand set aside. Penalty - Demand of ₹ 15,53,701/- with interest on excess charges - Held that - The said demand with interest has been paid up voluntarily by the appellant during the Department audit. Ld. Consultant submits that the appellant is not contesting the said demand - the matter as regards penalty, it is held that there cannot be any penalty in this case since the amount was already paid up on being pointed out - demand upheld - penalty set aside. Demand of ₹ 2,33,285/- on commission received from steamer agents/airlines - time limitation - Held that - The demand of ₹ 2,33,285/- on airline/steamer commission is hit by limitation since it is even beyond the extended period of limitation that can be covered in the Show Cause Notice dated 05.04.2010 - demand set aside. Appeal allowed in part.

Summary

Issues:
1. Classification of services under Business Auxiliary Services (BAS).
2. Liability for non-receipted expenses and commission received.
3. Imposition of interest, penalties, and demands under relevant provisions of law.
4. Applicability of service tax on excess charges collected.
5. Time limitation for demands related to commission received from steamer agents/airlines.

Issue 1: Classification of services under Business Auxiliary Services (BAS):
The Department contended that services provided by the appellants fall under BAS, leading to a demand for unpaid service tax. The Commissioner confirmed demands under BAS and imposed penalties. However, the Tribunal, citing precedent cases, ruled in favor of the appellants, stating that the demand for service tax under BAS on freight charges was unjustified. Consequently, the demands and penalties under BAS were set aside.

Issue 2: Liability for non-receipted expenses and commission received:
The appellants were accused of not discharging service tax liability on various transactions, including non-receipted expenses and commission received. The Commissioner upheld the demands, interest, and penalties related to these charges. During the hearing, the appellants did not contest the demand for excess charges and had voluntarily paid the amount. The Tribunal found the penalty imposed unjustified, setting it aside.

Issue 3: Imposition of interest, penalties, and demands under relevant provisions of law:
The Department issued Show Cause Notices proposing demands, interest, and penalties under different provisions of law. The Commissioner confirmed the demands and imposed penalties under Sections 76 and 78 of the Finance Act, 1994. However, the Tribunal overturned these decisions, setting aside the demands and penalties that were deemed unjustified based on the circumstances of the case.

Issue 4: Applicability of service tax on excess charges collected:
The appellants collected excess charges from customers beyond what was paid to airlines/ships for transportation services. While the appellants paid the demanded amount voluntarily during an audit, they contested the imposition of penalties. The Tribunal found the penalty unwarranted and set it aside, as the amount had already been paid.

Issue 5: Time limitation for demands related to commission received from steamer agents/airlines:
The demand for service tax on commission received from steamer agents/airlines was contested based on time limitation. The appellants argued that the demand was beyond the extended period of limitation covered in the Show Cause Notice. The Tribunal agreed, setting aside the demand and penalties related to this liability due to being time-barred.

In conclusion, the Tribunal allowed both appeals, setting aside demands, interest, and penalties under various provisions of law, providing consequential benefits to the appellants as per the law.