2024 (8) TMI 1104 - AT - Service Tax

Levy of service tax - Commission/brokerage received from Shipping Lines - Cargo handling services - Difference on ocean freight collected and paid to shipping lines - Director Sitting fees - GTA services. Director Sitting fees - HELD THAT - The Appellant has accepted the demand of service tax of Rs.2,96,020/- confirmed in the impugned order on the Director Sitting Fees and contested the remaining demands. Regarding the demand of Rs.2,96,020/- confirmed on the Director Sitting Fees, it is observed that the Appellant has already paid this amount, but not paid the interest. Accordingly, the demand of service tax upheld along with interest confirmed in the impugned order on this count. As there is no suppression of fact with intention to evade the tax established in this case, no penalty is imposable on the Appellant on this demand confirmed and upheld. Commission/brokerage received from Shipping Lines - HELD THAT - There is no taxable service rendered by the appellant to the shipping lines and the commission earned is on account of booking of cargo with the shipping lines over the years. This amount is not liable for service tax under the category of business auxiliary service, as there is no agreement of 'commission agent' between the Appellant and shipping lines - This view has been taken by the Larger Bench of the Tribunal in the case of Kafila Hospitality Travels Pvt. Ltd. 2021 (3) TMI 773 - CESTAT NEW DELHI (LB) , wherein it has been held that the commission earned for selling of space by the shipping lines is not liable to service tax under the category of business auxiliary service - the demand confirmed in the impugned order on this count is not sustainable and is set aside. Cargo handling services - HELD THAT - It is observed that the demand of service tax has been confirmed by the ld. adjudicating authority on the amounts received by the appellant as 'reimbursable expenses' during the course of provision of CHA services. It is found that the such expenses received by the appellant are related to AD Code Registration charges, Custom Clearance charges, Port charges, EDI Registration charges, AWB fee etc. which were nothing but 'reimbursement' of actual expenses and hence they cannot form part of consideration for levy of service tax - reliance placed on the decision of CESTAT New Delhi in the case of Commissioner of Service Tax, New Delhi v. Karam Freight Movers 2017 (3) TMI 785 - CESTAT NEW DELHI wherein it has been held that the amounts reimbursed on actual basis are not to be included for Service Tax purpose - the demand confirmed in the impugned order on account of cargo handling service is not sustainable and is set aside. Difference on ocean freight collected and paid to shipping lines - HELD THAT - There is no finding in the impugned order to substantiate this allegation. From the records submitted by the Appellant it is found that the amount involved in this regard are the profit earned by the Appellant from ocean freight. Further, it is observed that the issue of taxability of profit earned on ocean freight is no longer res integra as the same issue has already been decided by this Tribunal in the case of Tierra Logistics Pvt. Ltd. 2023 (9) TMI 1141 - CESTAT KOLKATA - thus, the demand confirmed in the impugned order on this count is not sustainable and the same is set aside. GTA services - Transportation charges as recipient of services - HELD THAT - The invoice has been raised on the Appellant for transportation of the goods and it has been categorically mentioned in the said invoice that the Service Tax is to be paid by the Party. Accordingly, in respect of this invoice, the liability of payment of Service Tax on the freight amount of Rs.4,20,000/- is on the Appellant. Therefore, the Appellant is liable to pay Service Tax on this invoice on the freight amount of Rs.4,20,000/- under the category of GTA Service, along with interest. GTA services - HELD THAT - The services provided by the various local truck owners are not related to goods transportation service as there was no consignment note issued by such persons to the Appellant. The goods were moved on the consignment note issued by the Appellant to their customers and on the value of which the customers of the Appellant were liable to pay service tax as recipients of service. Thus, in this regard, it is held that the Appellant is not liable to pay service tax under the category of GTA service - demand set aside. Appeal disposed off.

Issues Involved:
1. Commission/brokerage received from Shipping Lines
2. Difference on ocean freight collected and paid to shipping lines
3. Cargo handling services
4. Director Sitting fees
5. GTA services

Detailed Analysis:

1. Commission/Brokerage Received from Shipping Lines:
The demand of Service Tax of Rs.10,11,406/- was confirmed on the commission/brokerage received by the appellant from shipping lines. The appellant argued that there was no service provided to the shipping lines and the commission earned was due to booking cargo with the shipping lines. The Show Cause Notice had alleged that the appellant acted as a 'commission agent' liable for service tax under 'business auxiliary service'. However, the Tribunal observed that there was no agreement of 'commission agent' between the appellant and the shipping lines, and the commission earned was not for any taxable service provided. This view was supported by the Larger Bench decision in Kafila Hospitality & Travels Pvt. Ltd. [2021-TIOL-159-CESTAT-DEL-LB], which held that commission earned for selling space by shipping lines is not liable to service tax under 'business auxiliary service'. Thus, the demand was set aside.

2. Difference on Ocean Freight Collected and Paid to Shipping Lines:
The demand of Service Tax of Rs.1,37,14,491/- was confirmed on the profit earned on ocean freight collected and paid during January 2013 to March 2016. The adjudicating authority had held that the profit earned was in the nature of Information and Tracking of Delivery Schedule services. However, the Tribunal found no substantiation for this allegation and observed that the profit was earned from ocean freight. The issue of taxability of profit earned on ocean freight was decided in favor of the appellant in several Tribunal decisions, including Tierra Logistics Pvt. Ltd. (25.09.2023 - CESTAT - Kolkata), where it was held that such profit is not liable to service tax under 'Business Support Service'. Consequently, the demand was set aside.

3. Cargo Handling Services:
The demand of Service Tax of Rs.46,39,520/- was confirmed on amounts received as 'reimbursable expenses' during the provision of CHA services. The appellant argued these were actual expenses related to AD Code Registration charges, Custom Clearance charges, Port charges, EDI Registration charges, AWB fee, etc., and should not be included in the taxable value. The Tribunal relied on the decision in Commissioner of Service Tax, New Delhi v. Karam Freight Movers [2017 (4) G.S.T.L. 215 (Tri. - Del.)], which held that reimbursed amounts on an actual basis are not to be included for Service Tax purposes. Thus, the demand was set aside.

4. Director Sitting Fees:
The demand of Rs.2,96,020/- was accepted by the appellant, who had already paid this amount. The Tribunal upheld the demand along with interest but held that no penalty was imposable as there was no suppression of facts with the intention to evade tax.

5. GTA Services:
The demand of Service Tax of Rs.1,05,68,818/- was confirmed on transportation charges as the recipient of services. The appellant argued that they hired trucks from various individuals and local markets, and no consignment notes were issued by these truck owners. The Tribunal found that most invoices were for 'Hire charges' and not for transportation of goods, except one invoice from M/s. Rishab Trans Management dated 05.01.2017. For this invoice, the appellant was liable to pay Service Tax on the freight amount of Rs.4,20,000/- under GTA Service, along with interest. For the remaining demand, the Tribunal held that the appellant was not liable to pay service tax under GTA service as the services provided by local truck owners did not involve consignment notes. Thus, the demand was largely set aside except for the specific invoice mentioned.

Conclusion:
1. The demand of Rs.10,11,406/- on commission/brokerage was set aside.
2. The demand of Rs.1,37,14,491/- on the profit earned on ocean freight was set aside.
3. The demand of Rs.46,39,520/- on cargo handling services was set aside.
4. The appellant was liable to pay Service Tax on Rs.4,20,000/- under GTA Service along with interest, but the remaining demand under this head was set aside.
5. The demand of Rs.2,96,020/- on Director Sitting Fees was upheld, but no penalty was imposed.

The appeal was disposed of on these terms.

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