2024 (3) TMI 1283 - AT - Service Tax

Levy of service tax - collection of excess amount from customers over and above the actual ocean freight paid to the shipping lines - period from April 2012 to September 2012 - HELD THAT - The Adjudicating Authority has considered in Paragraphs 10.4 and 10.5 that the amount collected during the course of providing the Steamer Agent Service is subject to levy of Service Tax. However, he has not stated under which category and how this amount is an excess amount collected as freight would be consideration and the appellant has paid the Service Tax on the commission received as Steamer Agent. The amount collected is some excess of ocean freight as they were not able to quantify the exact freight to be paid to shipping lines. The ocean freight cannot be subjected to levy of Service Tax as it is not a consideration for Steamer Agency Services. The Department itself admits that these are amounts collected in excess of ocean freight. There is no provision for levy of Service Tax on ocean freight. Further, as per the decision in the case of MESSRS SAL STEEL LTD. 1 OTHER (S) VERSUS UNION OF INDIA 2019 (9) TMI 1315 - GUJARAT HIGH COURT , the Hon ble High Court has held that the demand of Service Tax on ocean freight cannot sustain. It is found that though Department alleges that the appellant has collected excess amount towards freight, the Show Cause Notice does not say as to which category of service the said amount would be liable to Service Tax. So also, it is not stated whether the amount is consideration for Steamer Agency Service. The Show Cause Notice does not propose to include the amount under particular category of service and demand the Service Tax under any category. The Adjudicating Authority has not made any finding as to whether the excess amount collected would be consideration for service. The Show Cause Notice is the foundation of the litigation. When the Show Cause is insufficient as to clarify the category of service, the demand cannot sustain and requires to be set aside. The impugned order is set aside - The appeal is allowed

Summary

Issues involved:
Whether the appellant is liable to pay Service Tax on excess amount collected towards the ocean freight.

Summary:

The appellant, engaged in providing various services, collected excess amount from clients over actual ocean freight without discharging Service Tax. The Department issued a Show Cause Notice demanding Service Tax on the excess amount. The Original Authority confirmed the demand along with interest and penalty. The appellant appealed to the Commissioner (Appeals) who upheld the decision, leading to the current appeal.

The appellant argued that a similar issue for a previous period was resolved in their favor by the Commissioner (Appeals) and Tribunal. They contended that ocean freight cannot be subject to Service Tax as it is included in the CIF value of goods. Previous decisions also supported this argument. The Department's Representative reiterated the findings of the impugned order.

Upon hearing both sides, the Tribunal noted the lack of clarity in the Show Cause Notice regarding the category under which the Service Tax demand was confirmed. The Adjudicating Authority did not specify how the excess amount collected related to any particular service category. The Tribunal found that the ocean freight cannot be subjected to Service Tax based on legal precedents and the lack of proper categorization in the Show Cause Notice. Citing relevant case laws, the Tribunal set aside the impugned order and allowed the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for Service Tax on excess ocean freight collected, emphasizing the importance of clarity in the Show Cause Notice for a valid demand.