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2025 (2) TMI 315 - AT - Service TaxLevy of service tax - Steamer Agency Service - income earned from freight forwarding activity pertaining to the ocean freight related to the ocean cargo - margin earned on sale of space on the shipping lines to the exporters/importers - HELD THAT - The issue decided in M/S. FREIGHTLINKS INTERNATIONAL (INDIA) PVT. LTD. 2024 (10) TMI 1629 - CESTAT BANGALORE where it was held that In the appellant s case if the space on the ships which it bought cannot be sold to its customers fully or due to market conditions or is compelled to sell at lower than purchase price the appellant incurs loss. In a contrary situation it gains profits. This activity is a business in itself on account of the appellant and cannot be called a service at all. Neither can the profit earned from such business be termed consideration for service. Conclusion - The appellant is not liable to pay service tax on the income from the freight forwarding activities in question. The impugned order is set aside - appeal allowed.
The primary issue considered in this judgment is whether the appellant is liable to pay Service Tax on income earned from freight forwarding activity related to ocean freight and the margin earned from selling space on shipping lines to exporters/importers under the service category of 'Steamer Agency Service'.
The appellant was engaged in various services, including 'Steamer Agency Service', 'Support Services of Business or Commerce', 'Business Auxiliary Service', and 'Goods Transportation Agency Service', and was registered for these services and paying service tax. The Department alleged that the income received from freight forwarding activities during the period from 2005-2006 to 2010-11 was classifiable under 'Steamer Agency Services' as per Section 65(100) read with Section 65(105)(i) of the Finance Act, 1994. Consequently, service tax demands were issued for different periods, confirmed along with interest and penalties. The appellant challenged these demands, leading to a remand for de novo adjudication. Despite further proceedings, the demands were confirmed, prompting the current appeal. The appellant's counsel argued that the issue is no longer res integra, as the Tribunal had previously addressed it in related appeals, allowing those appeals. The Revenue's representative maintained the findings of the impugned order. Upon hearing both sides and reviewing the records, the Tribunal found that the issue of service tax on booking space in ships was covered by a previous Tribunal decision in the case of M/s. Tiger Logistics India Ltd. vs. Commissioner of Service Tax-II, Delhi. The Tribunal's interpretation in the referenced case emphasized that if a service is not rendered, service tax cannot be levied, even if an amount has been received. Moreover, if the service does not fall within the definition of 'taxable service' under Section 65(105), service tax cannot be levied. In cases of doubt regarding the taxability of a service, the benefit of doubt favors the assessee. The Tribunal also highlighted that any amount received must be for the service rendered and not for other purposes, such as compensation. Specifically, regarding the differential in ocean freight, the Tribunal noted that the appellant buys space on ships from the Shipping Line, which issues a Master Bill of Lading to the appellant. The appellant then sells this space to its customers, issuing a House Bill of Lading. This activity involves buying low and selling high, with the margin being the appellant's profit. The Tribunal concluded that this activity is a business in itself and not a service, and the profit earned cannot be considered consideration for service. Following the ratio of the decision in the Tiger Logistics case and similar precedents, the Tribunal set aside the impugned order and allowed the appeal, concluding that the appellant is not liable to pay service tax on the income from the freight forwarding activities in question.
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