2019 (3) TMI 1502 - AT - Service Tax

Levy of service tax - reimbursable expenses or not - Held that - It can be seen that the charges are in the nature of CMS/EDI Charges, Insurance Charges, Demurrage Charges etc. Being actuals in the nature of Reimbursable Expenses, the decision of the Hon ble Apex Court in the case of M/s. Inter-continental Technocrats and Consultants 2012 (12) TMI 150 - DELHI HIGH COURT would squarely apply and the demand of service tax on these charges cannot be sustained - demand set aside. Demand of service tax - Ocean Freight Charges - Held that - This Tribunal in the case of M/s. Greenwich Meridian Logictics (I) Pvt Ltd. Vs Commissioner of Service Tax, Mumbai 2016 (4) TMI 547 - CESTAT MUMBAI for the appellants has considered the very same issue in detail and has held that Ocean Freight Charges are not liable to service tax - the demand on Ocean Freight Charges cannot be sustained and require to be set aside. Scope of SCN - Held that - Though the demand in the show-cause notice is made under Business Support Service, the Commissioner has travelled beyond the show-cause notice and confirmed the demand under Business Auxiliary Service. For this reason also, the impugned order cannot sustain. Appeal disposed off.

Summary

Issues:
- Discharge of service tax on various charges
- Allegations of short-payment of service tax
- Demand of service tax under Business Support Service
- Demand of service tax on Ocean Freight Charges
- Confirmation of demand under Business Auxiliary Service
- Applicability of judgments on Ocean Freight Charges
- Commissioner's decision beyond the show-cause notice

Analysis:
The appellants provided logistics support for exporters and importers, raising invoices on various charges. The audit revealed non-inclusion of charges in taxable value for service tax, including Ocean Freight Charges higher than actual amounts. A show-cause notice alleged short-payment of service tax under Business Support Service, proposing demand, interest, and penalties. The original authority confirmed service tax under Business Auxiliary Services and imposed penalties, leading to the appeal.

The appellants contended that they discharged service tax for services from Sl. Nos. 1 to 14 under Business Support Services, while charges from Sl. Nos. 15 to 21 were Reimbursable Expenses exempt from service tax based on a Supreme Court decision. They challenged the demand of Ocean Freight Charges under Business Support Service, confirmed under Business Auxiliary Service by the Commissioner. The issue of Ocean Freight Charges' taxability was addressed in various Tribunal judgments cited by the appellants.

The Revenue supported the original order's findings, opposing the appellants' contentions regarding the demand category discrepancy and the Commissioner's decision. The Tribunal noted the appellants' compliance with service tax on certain charges and ruled in favor of the appellants for charges from Sl. Nos. 15 to 21, considering them Reimbursable Expenses exempt from service tax. The Tribunal also upheld the appellants' argument on Ocean Freight Charges, citing previous Tribunal decisions that deemed them not subject to service tax.

Moreover, the Tribunal found the Commissioner's decision to confirm the demand under Business Auxiliary Service beyond the show-cause notice's scope, leading to the impugned order's invalidation. Consequently, the Tribunal set aside the demand on Ocean Freight Charges and other charges, allowing the appeal with any consequential reliefs. The department's cross objection was disposed of accordingly, resulting in a favorable outcome for the appellants.