2010 (3) TMI 223 - AT - Service Tax

Services provided by CHA business auxiliary service brokerage charged from steamer agent CHA arranged containers for their clients, who are the exporters, through steamer agent and the steamer agent pays brokerage to the assessees for the services during 2004-05 held that since the secondary services ultimately get consumed/merged with services that are being exported, no service tax would be leviable on such secondary services, the assessees cannot be held liable to pay service tax - Circular No.56/5/2003- dt. 25.4.2003

Summary

Issues:
Classification of services under 'Business Auxiliary Service' for brokerage charges received by a CHA. Liability to pay service tax. Applicability of Circular No.56/5/2003. Tribunal's precedent in Lee & Muir Head Pvt. Ltd. case.

Analysis:
The case involved a Customs House Agent (CHA) who received brokerage charges from a steamer agent for services rendered, potentially falling under 'Business Auxiliary Service' during 2004-05 and 2005-06. A show-cause notice was issued for recovery of service tax, interest, and penalty. The Assistant Commissioner initially ruled in favor of the CHA, but the Commissioner later held the CHA liable for service tax due to receiving commission for arranging containers for export purposes. The Commissioner confirmed the demand but dropped the penalty.

Upon appeal, the Tribunal considered that the CHA arranged containers for exporters through the steamer agent, with the secondary services being used by the primary service provider for exporting services. Citing Circular No.56/5/2003, which states that no service tax is leviable on secondary services that merge with exported services, the Tribunal found the CHA not liable for service tax. The Tribunal also referenced a previous decision in Lee & Muir Head Pvt. Ltd. case to support this view.

In conclusion, the Tribunal set aside the Commissioner's order, allowing the appeal without addressing other submissions raised by the CHA. The judgment emphasized that since the secondary services provided by the CHA were ultimately consumed in the exported services, no service tax liability existed. The decision was made in line with the Circular and the precedent set by the Tribunal in a similar case.

This comprehensive analysis highlights the key legal issues of service tax liability, classification of services, interpretation of Circulars, and reliance on previous Tribunal decisions, providing a detailed overview of the judgment's reasoning and outcome.