2018 (3) TMI 772 - AT - Service Tax

Business Auxiliary Service - While charging their customers towards freight charges for the cargo booked, they are collecting extra charges and collect the same from their clients - whether the service fall under Business Auxiliary Services? - Held that - The demand is made alleging that the appellant had received consideration for pre-booking of space in airlines/ shipping lines - reliance placed in the decision in the case of Greenwich Meridian Logistics (India) Pvt. Ltd. Versus Commissioner of Service Tax Mumbai 2016 (4) TMI 547 - CESTAT MUMBAI , where it was held that The notional surplus earned thereby arises from purchases and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) ibid will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed. Therefore, the demands, with interest thereon, and penalties are set aside. The demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues: Determination of whether revenue from charging extra freight to customers for cargo transportation falls under Business Auxiliary Service.

Analysis:
1. Facts and Background: The appellants provided Custom House Agent Service and were registered with the service tax department. During an audit, it was found that they booked space for cargo transportation and charged customers extra freight for the transportation of goods by airlines or steamer agents. The department viewed this revenue as falling under Business Auxiliary Service, leading to a demand for service tax, interest, and penalties.

2. Legal Arguments: The appellant argued that the issue was already decided by the Tribunal in previous cases, citing the decisions in Bax Global India Ltd. Vs. Commissioner of Service Tax, Chennai and Greenwich Meridian Logistics (I) Pvt. Ltd. Vs. CST, Mumbai. They contended that the revenue earned was not taxable under Business Auxiliary Service.

3. Tribunal's Decision: The Tribunal examined the nature of the transactions involving the appellant. It noted that the appellant acted as a multi-modal transport operator, assuming responsibility for the performance of contracts and ensuring safe delivery of goods. The appellant contracted with carriers without diluting its contractual responsibility to consignors, engaging in principal-to-principal transactions for procuring space for transportation.

4. Legal Interpretation: The Tribunal emphasized that the revenue earned by the appellant was from the purchase and sale of space, not from acting as an agent for clients with space on vessels. It highlighted that the transactions were independent principal-to-principal dealings, with freight charges being consideration for space procured from shipping lines. The Tribunal concluded that the revenue did not fall under Business Auxiliary Service.

5. Final Decision: Based on the analysis and legal interpretation, the Tribunal set aside the demand made by the department, allowing the appeal with consequential relief. The operative portion of the order was pronounced in open court, signaling the Tribunal's decision in favor of the appellant.