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2024 (11) TMI 291 - AT - Service Tax


Issues:
1. Whether the profit earned by a freight forwarder from purchasing cargo space and selling it to customers is liable to service tax under the category of business auxiliary service.
2. Whether the decision of the CESTAT Hyderabad Bench in a similar case is applicable to the present case.
3. Whether the matter should be reconsidered in view of subsequent developments, including the decision of the CESTAT Hyderabad Bench and other pending cases against the appellant.

Analysis:

Issue 1:
The appellant, a freight forwarder registered with the service tax department, was engaged in purchasing cargo space from shipping lines and selling it to customers for profit. The department contended that the profit earned by the appellant was liable to service tax under the category of business auxiliary service. The Tribunal examined the nature of the transactions and the appellant's role as a principal in buying and selling cargo space. Referring to a Circular of the CBEC, the Tribunal held that when a freight forwarder acts as a trader dealing on a principal-to-principal basis, the service tax is not applicable. The Tribunal also cited a previous case where it was held that buying and selling space on ships does not amount to rendering a service, and any profit earned through such transactions is not subject to service tax. Consequently, the demand for service tax, interest, and penalties was set aside, and the appeal was allowed.

Issue 2:
The appellant's counsel referred to a decision by the CESTAT Hyderabad Bench in a similar case where the issue was decided in favor of the appellant. The Tribunal acknowledged this decision and found that the issue in the present case was prima facie decided in favor of the assessee based on the Hyderabad Bench's ruling. However, considering that the Hyderabad Bench's decision was made after the adjudication order in the present case and due to multiple proceedings against the appellant in different jurisdictions, the Tribunal decided to remand the matter to the adjudicating authority for a fresh de novo order.

Issue 3:
Given the subsequent development of the decision by the CESTAT Hyderabad Bench and the status of other pending cases against the appellant, the Tribunal set aside the impugned order and remanded the matter for a fresh adjudication. The Tribunal emphasized the need to reconsider the matter in light of the new developments and multiple proceedings involving the appellant in different jurisdictions.

In conclusion, the Tribunal's decision set aside the demand for service tax, interest, and penalties, based on the appellant's role as a trader dealing on a principal-to-principal basis. The matter was remanded for a fresh de novo order considering the subsequent developments and multiple proceedings against the appellant.

 

 

 

 

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