2019 (5) TMI 74 - AT - Service Tax

Business Auxiliary Services - Revenue is of the opinion that such sale and purchase of the space on the vessel constitutes rendering service and service tax is chargeable on the difference between the price at which the said space was initially purchased from the shipping liner and the price which was charged from the customers by the appellant - HELD THAT - When the appellant is purchasing space, on his own account, on the ship and, in turn, selling the same to their customers, is acting as businessmen and not as a service provider. He is purchasing the space at a lower price and selling the same at a higher price for a profit. Conversely, if he is not able to sell the entire spaces that he had bought or he is forced to sell the same at a lower rate, he may incur a loss. In the instant case, the demand is made on the profit earned during the relevant period by purchasing and selling the space. By no stretch of imagination, can this be considered as a service to their customers. The appellant is acting as a principal and is buying spaces in that capacity and is selling the same to their customers as a principal. There is no provision in the Finance Act, 1994 to charge service tax on profit earned from trading. Service tax can only be levied on the value of taxable services rendered. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of service tax liability on profit earned from purchasing and selling space on vessels.

Analysis:
The case involved an appeal against an Order-in-Appeal dated 30.05.2018, where the appellant was demanded service tax on the profit earned from purchasing and selling space on vessels. The revenue contended that such transactions constituted a service rendered, attracting service tax liability under Sec.73(2) of the Finance Act, along with interest and penalties. The appellant argued that they were acting as businessmen, buying space at a lower price and selling it at a higher price, making a profit. They highlighted previous cases where similar demands were set aside by the Tribunal and referred to a CBEC circular exempting freight forwarders from service tax liability when acting as principals in providing transportation services. The departmental representative supported the lower authorities' findings but did not dispute the nature of the transactions.

Upon considering the arguments and records, the Tribunal held that the appellant, by purchasing and selling space on vessels, was acting as a principal and not a service provider. The profit earned from trading activities, where goods were bought and sold at different prices, did not fall under the purview of taxable services for service tax levy. The Tribunal emphasized that service tax could only be levied on the value of taxable services rendered, not on the profit earned from trading activities. Therefore, the impugned order demanding service tax on the profit from purchasing and selling space on vessels was deemed unsustainable and set aside, allowing the appeal.