2018 (7) TMI 333 - AT - Service Tax

Business Auxiliary Services - freight charges collected by the appellant - according to the Department, these are nothing but charges for the transportation of cargo from the customer s premises to the desired destinations or vice versa as per the directions of the customers and would be taxable under BAS for the period 1.7.2003 to 30.4.2006 and would fall under the category of BSS with effect from 1.5.2006 - Held that - The issue whether the said charges collected by the appellant would fall under BAS has been decided in the case of M/S. SKYLIFT CARGO (P) LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI AND (VICE-VERSA) 2018 (2) TMI 320 - CESTAT CHENNAI , where it was held in favor of the assessee noting that mere sale and purchase of cargo space and earning profit in the process is not a taxable activity and that commission earned by the assessee while acting on behalf of the exporter and mark-up value was of freight charges are not to be considered as commission - demand set aside. For the period from 1.5.2006 - Scope of SCN - Business Support Services - Held that - It is seen that the Commissioner has confirmed the demand under BAS. It is found that the Commissioner has travelled beyond the scope of the show cause notice. For this reason, the demand cannot sustain - demand of service tax on freight charges under BAS is unjustified and requires to be set aside. Services provided to SEZ Unit - benefit of N/N. 4/2004 - Held that - Even if the event is held outside, since the services were for advertisement of product of SEZ, the services provided is to be considered as consumed within SEZ - benefit of notification allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Taxability of freight charges under Business Auxiliary Service (BAS) or Business Support Service (BSS).
2. Eligibility for exemption under Notification No. 4/2004 for services rendered to SEZ units.

Detailed Analysis:

1. Taxability of Freight Charges under BAS or BSS:
The appellants, registered under various service categories, were audited, revealing charges under different heads for transporting cargo. The department issued a show cause notice, alleging that freight charges collected were liable to service tax under BAS for the period 2004-2006 and under BSS for 2006-2010. The original authority confirmed the demand under BAS for the entire period, along with interest and penalties. The department's cross-objections contended that for 2006-2010, the activity should be taxable under BSS, not BAS.

The appellants argued that the ocean/air freight charges are not taxable under BAS, citing several case laws, including Bax Global Ltd. and Skylift Cargo Pvt. Ltd. The Tribunal agreed, noting that the Commissioner had confirmed the demand under BAS despite the show cause notice alleging BSS. This was beyond the scope of the notice, making the demand unsustainable. The Tribunal referenced the Skylift Cargo Pvt. Ltd. case, where it was held that mere sale and purchase of cargo space and earning profit is not a taxable activity under the Finance Act, 1994. The Tribunal found no merit in the Revenue's appeal and set aside the demand for service tax on freight charges under BAS.

2. Eligibility for Exemption under Notification No. 4/2004 for Services Rendered to SEZ Units:
The appellants also contested the denial of exemption for services rendered to SEZ units, which the department claimed were performed outside the SEZ. The Tribunal referred to the Vision Pro Event Management case, which clarified that services provided to SEZ units are exempt under Notification No. 4/2004, even if partially consumed outside the SEZ. The Tribunal emphasized that the SEZ Act, 2005, which overrides other laws, intends to exempt taxes on services provided to SEZ units. The notification's successor, Notification No. 9/2009, further supports this interpretation by explicitly exempting services provided to SEZ units, regardless of location.

The Tribunal concluded that the denial of exemption was unjustified and set aside the impugned order, allowing the appeals with consequential relief. The department's cross-objections for classifying the activity under BSS were dismissed due to lack of substantiating material.

Conclusion:
The impugned orders were set aside, and the appeals were allowed with consequential relief. The cross-objections by the department were dismissed, and the early hearing applications by the appellant were disposed of accordingly.