2021 (9) TMI 500 - AT - Service Tax

Levy of service tax - Clearing and Forwarding Agency Service - difference between the amounts charged by it from its clients towards Ocean Freight and the amounts paid by it to the Shipping line towards Ocean Freight - steamer agency service - amount received from the agents of the Shipping Line for booking cargoes - differential amounts of Service Tax be demanded under Section 73 of the Finance Act, 1994 - extended period of limitation - levy of interest and penalty. Is the appellant liable to discharge service tax on the difference between the amounts charged by it from its clients towards Ocean Freight and the amounts paid by it to the Shipping line towards Ocean Freight under the head of Clearing and Forwarding Agency Service ? - HELD THAT - Trading in Ocean Freight is not a service being rendered to the client and no amount is being paid by the client to the appellant as per the records towards trading of cargo space. Evidently as any prudent business would, the appellant is buying space on the cargo ship at a lower price and selling it to its client at a higher price. The difference is its profit. It would have been a different case, if the appellant is organizing space on the ship for their clients and the client is paying shipping line directly and the service of organizing or arranging the space on the ship, the appellant gets paid service charge by the client. In such an arrangement, the amount being received would be a consideration for the service. The present arrangement is an arrangement of the trader who buys cargo space at a lower price and sells it at a higher price and enjoys the margin as profit. The profits gained by the appellant by buying space on ships at lower price and selling at a higher price to the customers cannot by any stretch of imagination be called Clearing and Forwarding Agent Service . No service tax can be charged on this amount. Whether the appellant is liable to discharge service the on the amounts which it received from the agents of the Shipping Line for booking cargos under the head Steamer Agency Service or not? - HELD THAT - There is nothing on record to prove either that the appellant was a steamer agent or that the appellant rendered service to a shipping line. The service, if any, is rendered by the appellant, it is to the broker and not to the shipping line. Therefore, no service tax can be charged on the disputed amount under the category of Steamer Agent Service on the amounts paid by the brokers to the appellant. Since no demand can be sustained, neither can any interest be charged, consequently, the penalties imposed upon the appellant also needs to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Liability to discharge service tax on the difference between amounts charged from clients towards Ocean Freight and amounts paid to Shipping lines under 'Clearing and Forwarding Agency Service'.
2. Liability to discharge service tax on amounts received from agents of the Shipping Line for booking cargoes under 'Steamer Agency Service'.
3. Demand of differential amounts of Service Tax under Section 73 of the Finance Act, 1994.
4. Invocation of the extended period of limitation.
5. Charging of interest on the differential service tax.
6. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Liability to Discharge Service Tax on Ocean Freight Differential:
The appellant is engaged in various activities related to transportation of goods and is registered under multiple service categories including Clearing and Forwarding Agent Service. The dispute centers on whether the difference between the amounts charged to clients for Ocean Freight and the amounts paid to shipping lines should be taxed as part of the Clearing and Forwarding Agent Service.

The appellant argues that the differential amounts represent business profits from trading cargo space, not a service rendered. They purchase cargo space from shipping lines and sell it to clients, sometimes at a profit and sometimes at a loss. The Tribunal agreed, noting that the appellant's activities of buying and selling cargo space do not constitute a Clearing and Forwarding Agent Service. The profit or loss from these transactions is not a taxable service. This view aligns with the precedent set in Seamax Logistics Ltd. vs Commissioner of Central Excise and Service Tax, Tirunelveli.

2. Liability to Discharge Service Tax on Amounts Received from Agents:
In Service Tax Appeal No. 263 of 2008, the appellant received commissions from agents of shipping lines for booking cargoes. The Revenue contended that this should be taxed under 'Steamer Agency Service'. The Tribunal found that the appellant did not render services to the shipping lines but to their agents. As per Section 65(105)(i), service tax is applicable to services rendered to a shipping line by a steamer agent. Since the appellant provided services to agents and not directly to shipping lines, the amounts received cannot be taxed under 'Steamer Agency Service'.

3. Demand of Differential Service Tax under Section 73:
Show-cause notices were issued to recover the alleged differential service tax along with interest and penalties. However, given the Tribunal's findings that the differential amounts from Ocean Freight and commissions from agents are not taxable under the categories claimed by the Revenue, the demands under Section 73 cannot be sustained.

4. Invocation of Extended Period of Limitation:
The appellant contested the demands on the grounds of limitation, arguing that the Revenue did not justify the invocation of the extended period under Section 73. Since the Tribunal ruled in favor of the appellant on the merits of the demands, it deemed it unnecessary to address the limitation issue.

5. Charging of Interest on Differential Service Tax:
As the demands for differential service tax were not upheld, the question of charging interest on these amounts became moot. Consequently, no interest can be charged.

6. Imposition of Penalties:
Given that the demands for service tax were not sustained, the penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994, were also set aside. The Tribunal found no basis for the penalties as the primary demands were invalid.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals, providing consequential relief to the appellant. The operative portion of the order was pronounced in open court on 01/09/2021.