2023 (10) TMI 113 - AT - Service Tax

Levy of Service tax - mark up ocean freight - HELD THAT - The dispute in the present case is for the period from 01.01.2011 to 30.06.2012. In the case of Marine Container 2019 (3) TMI 1388 - CESTAT CHENNAI the period of dispute was from 01.04.2005 to 31.12.2010 where it was held that with reference to amount collected from exporters/shippers the original authority clearly recorded that it is not the case that this amount is a commission earned by the respondent while acting on behalf of the exporter and said mark-up value is of freight charges and are not to be considered as commission. The demand in the present appeals cannot sustain and deserves to be set aside - The impugned order accordingly, set aside - Appeal allowed.

Summary

Issues involved: Liability to pay service tax on mark up ocean freight under section 67(1) of the Finance Act, 1994.

For the issue of liability to pay service tax on mark up ocean freight, the Commissioner (Appeals) upheld the order of the Assistant Commissioner of Central Excise, except setting aside the penalty imposed under Section 78 of the Finance Act, 1994. The appellant contended that the issue is covered by a previous decision of the Tribunal in a similar case. The authorized representative for the department supported the impugned order, stating that it does not require any interference. The Tribunal referred to a previous decision regarding the trading of cargo space and the profit earned in such transactions. Based on this decision, the Tribunal found that the demand for service tax on mark up ocean freight cannot be sustained and set aside the impugned order, allowing the appeals with consequential relief.

In the present case, the dispute was for the period from 01.01.2011 to 30.06.2012, while the previous case had a period of dispute from 01.04.2005 to 31.12.2010. The Tribunal highlighted the analysis from a previous case regarding the collection of mark-up on ocean freight, stating that it is considered trading of cargo space and not a taxable activity. The Tribunal further discussed the commission received from airlines or agents, emphasizing that it is profit earned on business activities and not a taxable service. The original authority's findings supported the view that the mark-up value collected from exporters is an element of profit in the transaction and not a commission subject to service tax. Based on these findings and the precedent set by the previous decision, the Tribunal concluded that the demand for service tax on mark up ocean freight cannot be sustained and set aside the impugned order, allowing the appeals with consequential relief.