2019 (4) TMI 131 - AT - Service Tax

Business Auxiliary Service - appellants were collecting port handling charges and terminal handling charges and remitted the same to M/s.Kawasaki - Department has alleged that said activity falls under Customer Care Services provided on behalf of the client within the definition of Business Auxiliary Service‛ - Held that - Both the authorities have stated that appellant provided port handling and terminal handling services to their customers. Appellant as an agent of M/s.Kawasaki Liner Services collected port handling charges and terminal handling charges from their customers and remitted the same to their principal. However, they have not collected any mark up or retained any part of the charges collected from their customers. They have just passed on the same to their principals. While collecting the port handling charges or terminal handling charges, appellants have not rendered any such service under this category. It is in fact Kawasaki Liner Service who have rendered these services. The appellants having not provided any service of port handling or terminal handling service and having not collected any consideration in this regard, the demand of service tax under this category on the appellants cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax under the category of Business Auxiliary Service for port handling and terminal handling charges collected by the appellants on behalf of their principal.
2. Interpretation of the definition of 'Business Auxiliary Service' in relation to the services provided by the appellants as agents.

Analysis:
1. The appellants were engaged in providing services under various categories, including acting as agents for M/s. Kawasaki and collecting port handling and terminal handling charges from customers on behalf of their principal. The tax authorities issued a show cause notice demanding payment of service tax, interest, and penalties for not discharging service tax under the category of Business Auxiliary Service. The original authority confirmed the demand, which was partially upheld by the Commissioner (Appeals), leading to the appeal before the tribunal.

2. The appellant's counsel argued that the appellants merely acted as agents for M/s. Kawasaki, collecting charges on their behalf without retaining any amounts. It was contended that the charges collected were not remuneration for services rendered but expenses collected from customers on behalf of the principal. On the other hand, the department contended that the charges collected should be included in the taxable value for service tax purposes, as the appellants provided port handling and terminal handling services.

3. After hearing both sides, the tribunal observed that the appellants acted as agents of M/s. Kawasaki, collecting charges and remitting them to the principal without retaining any part of the collected amounts. The tribunal noted that the services of port handling and terminal handling were actually rendered by M/s. Kawasaki, not the appellants. As the charges collected were merely expenses passed on to the principal, without the appellants providing or retaining any part of the services, the tribunal held that the demand for service tax under this category could not be sustained.

4. Consequently, the tribunal set aside the impugned order, allowing the appeal with consequential benefits as per the law. The judgment emphasized that since the appellants did not provide the port handling or terminal handling services themselves and did not collect any consideration for such services, the demand for service tax under the Business Auxiliary Service category was not justified.

Conclusion:
The tribunal ruled in favor of the appellants, holding that they were not liable to pay service tax under the Business Auxiliary Service category for the port handling and terminal handling charges collected on behalf of their principal. The judgment clarified the distinction between expenses collected as agents and remuneration for services rendered, ultimately setting aside the demand for service tax.