2020 (3) TMI 317 - AT - Service Tax

Valuation - inclusion of reimbursable expenses in the assessable value - expenses incurred by them on EDI charges, Stamp paper charges, Miscellaneous charges, Crane charges, CFS storage charges, Liner Detention Charges etc., while providing the Cargo Handling Service, reimbursed - HELD THAT - The issue is settled by the Hon ble Apex Court in the decision of Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (3) TMI 357 - SUPREME COURT . Following the same, the demand cannot sustain and requires to be set aside - demand set aside. Business Auxiliary services - Amounts collected by the appellant in regard to cargo space provided to their clients - Demand of service tax - HELD THAT - The said activity is nothing but purchase and sale of cargo space and does not amount providing service - the demand under Business Auxiliary Service on such markup value collected in regard to cargo space in airlines/shipping line cannot sustain - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of reimbursable expenses in Cargo Handling Service under service tax.
2. Taxability of markup collected on cargo space in airlines/shipping lines under Business Auxiliary Service.

Analysis:

Issue 1:
The appellants were providing Cargo Handling Service and Business Auxiliary Service. The department contended that the appellants should include reimbursable expenses like EDI charges, Stamp paper charges, Crane charges, etc., in the taxable value for service tax payment under Cargo Handling Services. Additionally, the appellants were rendering Freight Forwarding Service and collecting higher amounts for cargo space, which the department believed should be subject to service tax under Business Auxiliary Service. The Original Authority and Commissioner (Appeals) upheld the demand, interest, and penalties imposed. The appellants challenged this demand through appeal.

Issue 2:
During the hearing, the Ld. Counsel referred to legal precedents to support their arguments. They cited the case of UOI Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. to address the taxability of reimbursable expenses. The issue of markup collected in relation to cargo space in airlines/shipping lines was also discussed, citing cases such as M/s. Leaap International Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai and Phoenix International Freight Services Pvt. Ltd. Vs. C.S.T, Mumbai. The Revenue representatives supported the impugned orders.

The Tribunal examined both issues in detail. Firstly, regarding the demand for service tax on reimbursable expenses, the Tribunal referred to the decision in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. and concluded that the demand could not be sustained. Therefore, the demand on reimbursable expenses was set aside. Secondly, concerning the markup collected on cargo space, the Tribunal determined that this activity constituted a purchase and sale of cargo space, not a service provision. Relying on the legal precedents cited by the Ld. Counsel, the Tribunal set aside the demand under Business Auxiliary Service on the markup value collected for cargo space in airlines/shipping lines.

In conclusion, both issues were decided in favor of the appellant and against the Revenue. The impugned orders were set aside, and the appeals were allowed with any consequential reliefs as per the law. The operative part of the order was pronounced in open court on 04.03.2020.