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2023 (12) TMI 568 - AT - Service TaxLevy of service tax - Business Support service or not - amount accounted as net-operating income in the financial accounts of the appellant is a consideration received by the appellant for providing services - extended period of limitation - HELD THAT - The appellant being a freight forwarder has discharged the service tax on the amount received for providing freight forwarding services. The amount accounted under net operating income is now brought to levy of service tax under BSS. This amount is only excess of the freight charges. The differential freight earned by the appellant is not consideration for services rendered by them to their client. The issue as to whether the difference in the freight charges is a consideration for services and is liable to service tax was analysed in various decisions. In the case of GREENWICH MERIDIAN LOGISTICS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI 2016 (4) TMI 547 - CESTAT MUMBAI , the very same issue came up for consideration and the Tribunal held that the notional amount earned by the assessee from purchase and sale of cargo space cannot be subject to levy of service tax. In the case of COMMISSIONER OF SERVICE TAX, NEW DELHI VERSUS M/S. KARAM FREIGHT MOVERS 2017 (3) TMI 785 - CESTAT NEW DELHI it was held that demand of service tax on the income earned by the assessee is profit earned out of sale of cargo space and cannot be subjected to levy under BAS. After considering the submissions and following the decisions, it is opined that the demand of service tax cannot sustain and requires to be set aside. Time Limitation - HELD THAT - Demand has been raised after the verification of the accounts of the appellant by Audit Group. The quantification of demand has been arrived from the accounts maintained by appellant - there are no positive act of suppression with intent to evade payment of tax established by department Further, the issue is contentious and there are several decisions in favour of assessee - the SCN issued invoking extended cannot sustain. The issue on limitation is also answered in favour of appellant. The impugned orders are set aside - Appeal allowed.
Issues Involved:
1. Whether the amount accounted as net-operating income in the financial accounts of the appellant is a consideration received by the appellant for providing services under the category of Business Support Service (BSS). 2. Whether the extended period is invocable or not. Summary: The appellants, engaged in handling export and import cargo, were audited, revealing that they did not discharge service tax on the mark-up received on freight charges. The department issued a show cause notice demanding service tax, interest, and penalties, which the appellants contested. Issue 1: Net-Operating Income as Consideration for Services under BSS The appellants argued that the excess amount received from freight charges, accounted as net operating income, is not subject to service tax as it represents profit from trading in cargo space, not for services rendered. They cited several judicial precedents, including EMU Lines Pvt. Ltd. and Greenwich Meridian Logistics, which held that such profits are not taxable under BSS. The Tribunal agreed, noting that the differential freight earned by the appellant is not consideration for services rendered and thus not liable to service tax under BSS. The Tribunal referenced multiple decisions supporting this view, including CST New Delhi Vs Karam Freight Movers and CST New Delhi Vs Continental Carriers, which affirmed that profit from the sale and purchase of cargo space is not a taxable service. Issue 2: Invocation of Extended Period The appellants contended that the issue was interpretational and they had a bona fide belief that these amounts need not be included in taxable value. The Tribunal found no evidence of suppression with intent to evade tax, as the demand was based on accounts maintained by the appellant and the issue was contentious with several decisions in favor of the assessee. Thus, the invocation of the extended period was not justified. Conclusion The Tribunal set aside the impugned orders, allowing the appeals with consequential relief, if any, and ruled in favor of the appellants on both issues, stating that the demand of service tax cannot sustain and the extended period cannot be invoked. (Pronounced in court on 13.12.2023)
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