2020 (3) TMI 752 - AT - Service Tax

Business Support Service - demand service tax on the ocean freight collected by the appellant - HELD THAT - It is brought out from the facts explained by both sides that activity is nothing but purchase and sale of cargo space. The amount received for such activity is a profit earned for purchase and sale of the cargo space. The Tribunal in the case of SURYA SHIPPING VERSUS COMMISSIONER OF CENTRAL EXCISE ST, RAJKOT 2020 (2) TMI 282 - CESTAT AHMEDABAD has analyzed the very same issue and has held that sale and purchase of cargo space is not service. If it is not a service then there is no question of considering it as an input service so as to include the charges in the taxable income. The amount received is nothing but profit from sale. In the present case also the demand is under BSS. In Surya Shipping the Tribunal held that the activity not being a service cannot be subject to levy of service tax under BSS also. Demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the activity of purchase and sale of cargo space by the appellant falls under 'Business Support Service' for levy of service tax?
2. Whether the charges collected by the appellant for ocean freight can be considered as 'input service' for the purpose of service tax?

Analysis:
1. The case involved appellants engaged in freight forwarding and logistics services facing a show cause notice for the levy of service tax under 'Business Support Service' for collecting charges, including purchasing cargo space from shipping lines. The appellant argued that their activity of buying and selling cargo space does not constitute a service and should not be classified under 'Business Support Service.' They highlighted that the charges collected are profits from the sale, not service fees. The Tribunal referenced a previous case and concluded that mere sale and purchase of cargo space does not qualify as a taxable activity. Therefore, the demand for service tax under 'Business Support Service' was deemed unsustainable, and the appeals were allowed.

2. The second issue revolved around whether the charges collected for ocean freight by the appellant could be considered as 'input service' for service tax purposes. The department contended that these expenses were essential for providing output services and should be included in the taxable value for service tax. However, the appellant argued that the charges were profits from the sale of cargo space, not input services. The Tribunal referenced previous decisions and held that since the activity was not classified as a service, it could not be subject to service tax under 'Business Support Service.' Therefore, the demands were set aside, and the appeals were allowed with consequential relief, if any, as per law.

This judgment by the Appellate Tribunal CESTAT Chennai, delivered by HON’BLE MS. SULEKHA BEEVI C.S. and HON’BLE MR. ANIL G. SHAKKARWAR, provides clarity on the classification of activities and charges in the context of service tax, emphasizing the distinction between services and profit from sales.