2024 (10) TMI 1629 - AT - Service Tax

Levy of service tax - Steamer Agency Services - income earned from Freight forwarding activity pertaining to the ocean freight related to the ocean cargo and the margin earned on sale of space on the shipping lines to the exporters/ importers - HELD THAT - The issue regarding service tax on the booking of space in the ships of the shipping lines is squarely covered by the Tribunal in the matter of M/s Tiger Logistics India Ltd. Vs. Commissioner of Service Tax-II Delhi 2022 (2) TMI 455 - CESTAT NEW DELHI where it is held that the appellant is not liable to pay service tax. Conclusion - Appellant were not liable to pay service tax on the margin earned from ocean freight. The appeals filed by the Revenue are dismissed.

Summary

The central issue in these appeals was whether the appellant was liable to pay service tax on income earned from freight forwarding activities related to ocean freight under the 'Steamer Agency' services category. The appellant was engaged in various services, including 'Steamer Agency' services, and was registered and paying service tax for these services. The Department alleged that the income from freight forwarding activities during the specified period was classifiable under 'Steamer Agency' services, demanding significant service tax amounts. The appellant challenged these demands, leading to a series of adjudications and appeals.

The adjudicating authority initially held that the appellant's activities of canvassing cargo for shipping lines were classifiable under 'Steamer Agent' services. However, the authority acknowledged that the appellant's claim for exclusion from paying tax on actual 'ocean freight' paid to the shipping line was valid, based on precedents such as Bax Global India Ltd. The authority determined that the margin earned in freight sales was taxable under 'Steamer Agent' services, but the actual ocean freight paid was not includable in the taxable service value, as the transportation of cargo through ocean vessels was not a defined taxable service during the relevant period.

The Committee of Chief Commissioners reviewed the Commissioner's order and disagreed with the exclusion of amounts paid to shipping lines from service tax liability. They argued that the appellant's service had the characteristics of a bundled service, primarily involving canvassing and booking cargo space on behalf of shipping lines. The essential character of the service was not transportation, and thus, the cost of transportation should not be excluded from the gross amount charged.

The Tribunal, while hearing the appeals, considered several precedents cited by the appellant's counsel, such as decisions in Gudwin Logistics, Agility Logistics Pvt. Ltd., and others, which supported the appellant's position. The appellant's counsel also referenced a Board Circular clarifying that freight forwarders acting as principals in transportation services are not subject to service tax. Additionally, the counsel argued that the demands were time-barred under Section 73 of the Finance Act, 1994, as the show cause notice was issued beyond the permissible period.

The Tribunal found that the issue of service tax on booking space in ships was covered by the decision in M/s Tiger Logistics India Ltd. The Tribunal held that if a service is not rendered, no service tax can be levied, and if the service does not fall within the definition of 'taxable service,' service tax cannot be imposed. The Tribunal noted that the appellant's activity of buying and selling ship space was a business transaction, not a service, and thus, the profit earned from such activity could not be considered consideration for a service.

Consequently, the Tribunal allowed the appeals filed by the appellant, finding that they were not liable to pay service tax on the margin earned from ocean freight. The Tribunal dismissed the appeals filed by the Revenue, upholding the exclusion of ocean freight from the taxable service value, as supported by existing Tribunal decisions.