2018 (2) TMI 317 - AT - Service Tax

Business auxiliary services - appellants herein are engaged in providing Logistic Support Services, such as, Cargo Consolidation, De-consolidation, Documentation, Customs Clearance, Freight Forwarding and other related services - It appeared to the Department that appellants are providing the services on behalf of overseas logistics company appointed by the overseas buyer and hence service tax liability would arise under the heading of Business Auxiliary Services. Held that - to qualify as a service provider of Business Auxiliary Service, the services have to be provided which would augment or enhance or supplement the business of the client, which would obviously result in improvement of the business income/profit of the client. In cases, where there is promotion or marketing of services, or provision of service on behalf of the client, there is more often an arrangement by which the service provider takes or is given the responsibility for increasing the scope for the service activity of the client, generally in a specific geographical area. No portion of the container freight services (CFS) chargers and Cargo Receipt or CR Charges received by the appellants from the Indian exporters of cargo are alleged to have been remitted or transferred to the foreign client to APL WMS HKL - no portion of the amount collected by the appellants from the Indian exporters of Cargo is being transmitted to APL WMS HKL. It is also pertinent to note that APL WMS HKL, do not also pay any commission fees or incentives to the appellants. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over service tax liability for Container Freight Services (CFS) and Cargo Receipt (CR) Issuance Charges provided by M/s. APL Logistics India (Pvt) Ltd. Whether services provided qualify as Business Auxiliary Services or Cargo Handling Services.

Analysis:

1. Nature of Services Provided:
M/s. APL Logistics India (Pvt) Ltd. argued that the services rendered are in the nature of handling export cargo, starting from cargo delivery in the warehouse till loading in the vessel. They contended that charges received were only for handling export cargo, thus not liable to service tax.

2. Classification of Services:
The appellants disputed the classification of their services as Business Auxiliary Services, stating that they provide Cargo Handling Services on their own account and account for income earned as their own. They argued that the reliance on the agreement clause by the Revenue was erroneous.

3. Legal Classification and Precedents:
The appellants cited CBEC Circular and legal precedents to support their claim that specific services excluded from taxable services cannot be classified under another category. They also argued that even if services were classified as Business Auxiliary, they qualify as export of services and are not liable to service tax.

4. Department's Argument:
The departmental representative supported the tax liability under Business Auxiliary Service, emphasizing that the services provided were for the promotion of the third party's business. They highlighted the agreement between APL Logistics India (Pvt) Ltd. and APL Logistics & Warehouse (Hong Kong) Ltd. as evidence.

5. Tribunal's Decision:
The Tribunal analyzed the definition of Business Auxiliary Service and concluded that no portion of charges collected by the appellants was remitted to the foreign client. They found no merit in the Revenue's case that the services provided were Business Auxiliary Services. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the judgment favored M/s. APL Logistics India (Pvt) Ltd., ruling that the services provided did not qualify as Business Auxiliary Services, and hence, were not liable to service tax. The Tribunal's decision was based on the lack of evidence showing remittance to the foreign client, leading to the setting aside of the tax liability imposed by the Revenue.