2019 (1) TMI 504 - AT - Service Tax

Business Auxiliary Services - appellants availed services of overseas agents for destuffing the cargo from the containers sent by them from India at Hub port and reshipped the cargo to the intended destinations - Taxability - Revenue observed that, the main activity of appellant is promoting services of various shipping lines and also managing distribution and logistics and that the services performed by appellants would be liable to classify under Business Auxiliary Service (BAS) - Held that - The issue concerning taxability of services performed by Multimodal Transport Operator has been laid to rest by the Tribunal in Greenwich Meridian Logistics 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. Extended period of limitation - Held that - By no account, can the department make an allegation that the activities of the appellants had been suppressed by them. This being so, the delayed issue of the SCN only on 23.10.2008 for the period 01.07.2003 onwards, extending the period of limitation is certainly not sustainable since there are no ingredients present to justify such invocation and will require to be set aside. Appeal allowed on merits as well as on limitation.

Summary

Issues:
Classification of services provided by Multimodal Transport Operator under taxable services; Validity of show cause notice issued by the department; Barred by limitation.

Classification of services provided by Multimodal Transport Operator:
The appellants, registered as Multimodal Transport Operator (MTO), were involved in destuffing cargo from containers sent from India and reshipping them to intended destinations. The department alleged that the services provided by the appellants fell under "Business Auxiliary Service" (BAS) and later under "Business Support Services" (BSS). The Tribunal, relying on the case of Greenwich Meridian Logistics, held that the services of a Multimodal Transport Operator cannot be classified as a taxable service under any taxing entry. The Tribunal emphasized that the appellants' activities involved contracting with carriers, issuing multi-modal bills of lading, and assuming risks, which constituted principal-to-principal transactions. Therefore, the freight charges paid to shipping lines and collected from client-shippers were part of independent transactions, not falling under taxable services.

Validity of show cause notice issued by the department:
The appellants argued that the show cause notice (SCN) proposing service tax liability under BAS and later under BSS was not sustainable. They contended that classifying the same activity under two different taxable services was unjustified. Furthermore, the appellants claimed that the SCN was barred by limitation since they had communicated with the department on various occasions regarding the issue dating back to 1998. The Tribunal agreed with the appellants, noting that the department had been informed about the appellants' activities as early as 1998. The delayed issuance of the SCN in 2008 for the period from 2003 onwards without sufficient justification to extend the limitation period was deemed unsustainable. As a result, the Tribunal set aside the SCN based on these grounds.

Conclusion:
The Tribunal found in favor of the appellants, ruling that the services provided by the Multimodal Transport Operator were not taxable under any entry. Additionally, the SCN issued by the department was deemed invalid due to being barred by limitation and the classification of activities under different taxable services. The appeal was allowed, granting consequential benefits to the appellants as per the law.