2020 (2) TMI 282 - AT - Service Tax

Business Support services - activity of purchasing space on ocean going vessels from shipping companies and selling the same to various exporters for export of goods - HELD THAT - There is no dispute about the activity being carried out by the appellant i.e. they are engaged in purchase and sale of space on ocean going vessels. In the transaction of purchase and sale of space, they earn some profit for the reason that in some cases, the sale price of the space to various exporters is more than the purchase price of the space paid to shipping companies. There is no service involved in such transaction as the purchase and sale of the space is an activity of sale and purchase and hence, not liable to service tax. This issue has been considered by various judgments time and again and this Tribunal held that since the activity of sale and purchase involves no service hence the profit earned on sale of space is not liable to service tax. The issue is no longer res-integra and in all the judgments it has been categorically held that any amount charged for space on ocean going vessels, over and above the purchase price is not liable to service tax - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the profit earned by the appellants on the sale and purchase of space on ocean-going vessels is liable to service tax under the category of Business Support Service.

Analysis:
The appellants engaged in purchasing space on ocean-going vessels from shipping companies and selling it to exporters, sometimes incurring losses. The dispute revolves around the service tax demand on the profit or excess freight charged by the appellants compared to the shipping companies. The Commissioner (Appeals) upheld the demand, leading to the present appeal. The appellant's counsel argued that the activity is merely sale and purchase, not involving any service, citing various judgments supporting their stance. The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order.

The Tribunal analyzed the nature of the appellant's activity, emphasizing that it involves the sale and purchase of space on vessels, resulting in profits when the sale price to exporters exceeds the purchase price from shipping companies. Relying on precedent and jurisprudence, the Tribunal concluded that since the activity is a sale and purchase transaction without any service element, it is not liable to service tax. Citing the case of Chinubhai Kalidas & Bros vs. CST, Ahmedabad, the Tribunal highlighted that mere sale and purchase of cargo space, without providing a particular service, does not attract service tax.

Further, the Tribunal referenced the case of CST, New Delhi vs. Karam Freight Movers, where it was established that the surplus earned from the sale and purchase of space is not in lieu of providing a service, thus not subject to service tax. Similarly, in the case of Pawan Cargo Forwarders Pvt. Limited vs. Pr. Commissioner of Service Tax, Chennai, it was reiterated that earning profit from the sale and purchase of cargo space does not constitute a taxable activity. The Tribunal aligned with previous judgments and set aside the service tax demand, allowing the appeals.

In light of the consistent legal precedents and judgments cited by the appellant's counsel, the Tribunal concurred that any amount charged for space on ocean-going vessels beyond the purchase price does not attract service tax. Consequently, the impugned order was set aside, and the appeals were allowed.