2021 (9) TMI 407 - AT - Service Tax

Levy of Service Tax - Support Services of Business or Commerce - ocean freight charges collected in the taxable value for the purpose of payment of Service Tax - demand with interest and penalty - extended period of limitation - HELD THAT - The Learned Hyderabad Bench of the CESTAT has decided an almost identical case, in the case of MARINETRANS INDIA PVT. LTD. VERSUS CST, HYDERABAD - ST 2019 (4) TMI 534 - CESTAT HYDERABAD , which is relied upon by the Learned Advocate for the appellant, where it was held that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions is not leviable to service tax. The lis appears to be no more res integra and therefore, the impugned orders cannot be sustained - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Service Tax liability on freight charges collected with mark-up value.

Analysis:
The case involved the issue of Service Tax liability on freight charges collected by the assessee with a mark-up value. The Department contended that the assessee's activities fell under "Support Services of Business or Commerce," and the mark-up value on ocean freight charges should be included in the taxable value for Service Tax calculation. Show Cause Notices were issued for recovery of Service Tax, interest, and penalties. The Order-in-Original confirmed the proposals, albeit with reduced liabilities. The appellant's appeals before the First Appellate Authority were rejected, leading to the present appeals before the forum.

The Tribunal heard arguments from both sides and referred to a similar case decided by the Hyderabad Bench of CESTAT in the matter of M/s. Marinetrans India Pvt. Ltd. v. C.S.T., Hyderabad-ST. The Hyderabad Bench's decision highlighted the distinction between acting as an intermediary and engaging in principal-to-principal transactions. It emphasized that buying and selling space on ships did not amount to rendering a service for Service Tax purposes. The Chennai Bench also supported this view in subsequent cases, such as M/s. TVS Dynamic Global Freight Services Ltd. v. Commr. of G.S.T. & C.Ex., Chennai and M/s. Nilja Shipping Pvt. Ltd. v. The Commissioner of Central Excise, Chennai-II. Based on these precedents, the Tribunal concluded that the demand for Service Tax, interest, and penalties could not be sustained in the present case.

Therefore, the Tribunal allowed the appeals, setting aside the impugned orders and providing consequential benefits, if any, as per the law. The judgment clarified the distinction between acting as an intermediary and engaging in principal-to-principal transactions in the context of Service Tax liability on freight charges collected with a mark-up value.