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2023 (5) TMI 100 - AT - Service TaxLevy of Service tax - cargo handling service - ocean freight - profit/mark up on ocean freight charges, treating it as integral part of cargo handling services - disputed period is from 01.10.2008 to 31.3.2013 - demand alongwith interest and equal penalty - HELD THAT - The issue is no more res integra as the same has been decided in catena of decisions, the latest being the judgment in the case of M/S. TIGER LOGISTICS (INDIA) LTD. VERSUS COMMISSIONER OF SERVICE TAX-II, DELHI 2022 (2) TMI 455 - CESTAT NEW DELHI where it was held that This activity is a business in itself on account of the appellant and cannot be called a service at all. Neither can the profit earned from such business be termed consideration for service. The Tribunal in an earlier decision the case of GREENWICH MERIDIAN LOGISTICS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI 2016 (4) TMI 547 - CESTAT MUMBAI 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. Demand set aside - appeal allowed - decided in favour of appellant.
Issues involved:
The issues involved in this case are the taxability of service tax on ocean freight and the liability of tax on profit/mark up. Details of the Judgment: Issue 1: Taxability of service tax on ocean freight The appellant provided a range of logistics services to clients, including cargo handling operations. The Directorate General of Central Excise Intelligence alleged evasion of service tax duty on cargo handling services. The appellant entered into contracts with Indian customers for transporting cargo within India. Investigations revealed that the appellant provided cargo handling services both within and outside India. The adjudicating authority confirmed a demand of Rs. 5,25,21,302/- for the period from 01.10.2008 to 31.03.2013. The appellant contested this demand, arguing that remittances made to non-resident service providers were reimbursement of freight charges and not liable for service tax. The appellant paid service tax only on certain charges and not on others. The department argued that the appellant should have paid service tax on the taxable value of cargo handling services provided. The Tribunal cited previous judgments to support the appellant's position that the profit earned from such business activities cannot be considered as consideration for service. The Tribunal dismissed the departmental appeal and allowed the appellant's appeal. Issue 2: Liability of tax on profit/mark up The appellant engaged in contracts with carriers for the safe delivery of goods, without diluting its contractual responsibility to the consignor. The Tribunal held that the appellant's activities were principal-to-principal transactions and not subject to service tax. The Tribunal set aside the demand, stating that the freight charges were consideration for space procured from the shipping line and not subject to service tax. The Tribunal dismissed the departmental appeal and allowed the appellant's appeal, providing consequential relief. The Tribunal's decision was pronounced in open court on 01.05.2023.
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