2024 (12) TMI 275 - AT - Service Tax

Appeal withdrawn by the Department on the grounds of amount involved being less than monetary limit prescribed therein - levy of service tax on the retained amount collected in the name of ocean freight - HELD THAT - Sub-section (1) of Section 67 provides that where service tax is chargeable on any taxable service with reference to its value, then such value shall, where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by the service provider. It is, therefore, clear that only such amount is subject to service tax which represents consideration for provision of service and any other amount which is not a consideration for provision of service cannot be subjected to service tax. It would be appropriate to refer to the decision of the Supreme Court in Union of India v. Intercontinental Consultancy and Technocrats 2018 (3) TMI 357 - SUPREME COURT . The Supreme Court observed that service tax is on the value of taxable services and, therefore, it is the value of the services which are actually rendered which has to be ascertained for the purpose of calculating the service tax. It is for this reason that the expression such occurring in Section 67 of the Act assumes importance. Consideration, which is taxable under Section 67 of the Finance Act, should be transaction specific. Incentives, on the other hand, are based on general performance of the service provider and are not to be related to any particular transaction of service. It needs to be noted that commission, on the other hand, is dependent on each booking and not on the target. If the air travel agent does not achieve the predetermined target, incentives will not be paid to the travel agents. The Larger Bench of this Tribunal in the case of Kafila Hospitality Travels Pvt. Ltd. vs. Commissioner of Service Tax, Delhi 2021 (3) TMI 773 - CESTAT NEW DELHI (LB) has dealt with this issue and has held ' They are paid on general performance of service provider and not to related to particular transaction. Hence, they are not consideration liable to Service Tax under Section 67 of Finance Act, 1994.' The demand confirmed on commission is also ordered to be set aside - appeal is allowed.

Summary

Issues:
1. Whether the demand of service tax on the retained amount collected in the name of ocean freight is valid.
2. Whether the demand of service tax on commission/brokerage received by the appellant is justified.

Analysis:

Issue 1:
The appellant, registered for providing taxable services, collected an amount higher than the actual ocean freight paid to shipping lines. The department alleged this amount as consideration towards taxable services. A show cause notice proposed service tax on the retained amount, which was confirmed initially but set aside in an appeal. The department was in appeal against this order but withdrew it due to monetary limit instructions. The present appeal challenges the service tax demand on the retained amount. The Tribunal referred to precedents where it was held that service tax is not leviable on ocean freight and that the differential freight amount should not be taxed. The Tribunal concurred with these findings, leading to setting aside the demand on the differential freight amount.

Issue 2:
The appellant also received commission/brokerage from shipping lines, on which service tax was proposed but not paid. The Tribunal referred to Section 67 of the Finance Act, which states that only the gross amount charged for providing the service is subject to service tax. The Supreme Court's interpretation emphasized that the value subject to service tax should be transaction-specific. Incentives, like commission, are not related to a particular transaction and are not considered taxable under Section 67. The Tribunal cited a previous case where incentives for achieving targets were held not liable to service tax. Applying similar reasoning, the Tribunal set aside the demand on commission/brokerage, aligning with the previous decision.

In conclusion, the Tribunal set aside the demands on both the retained amount collected in the name of ocean freight and the commission/brokerage received by the appellant, based on the interpretation of relevant legal provisions and precedents.