2023 (6) TMI 64 - AT - Service Tax

Levy of Service tax alongwith interest and penalty - Business Auxiliary services - service of procurement of space on the vessel - HELD THAT - Reliance placed in the case of GREENWICH MERIDIAN LOGISTICS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI 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. Therefore, the demands, with interest thereon, and penalties are set aside. There are no merits in the impugned order - appeal allowed.

Issues Involved:
1. Classification of services under 'Business Auxiliary Services'.
2. Demand and recovery of Service Tax.
3. Interest on the demanded Service Tax.
4. Imposition of penalties under various sections of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services under 'Business Auxiliary Services':
The core issue was whether the services provided by the appellant should be classified under 'Business Auxiliary Services' as defined under Section 65(105)(zzb) of the Finance Act, 1994. The Commissioner had classified the services provided by the appellant as 'Business Auxiliary Services' and confirmed the demand for Service Tax. However, the appellant argued that the issue was already settled in their favor by a previous decision of the Delhi Bench of CESTAT, which held that such services do not fall under 'Business Auxiliary Services'. The Tribunal agreed with the appellant, referencing several previous decisions, including those in Bhatia Shipping Pvt. Ltd. and Greenwich Meridian Logistics (I) Pvt. Ltd., which supported the appellant's position that the services rendered were not 'Business Auxiliary Services'.

2. Demand and Recovery of Service Tax:
The Commissioner confirmed the demand for Service Tax amounting to Rs. 16,46,32,093/- for the period from April 2009 to March 2014, Rs. 1,59,88,245/- for the period 2014-15, Rs. 1,14,94,801/- for the period 2015-16, and Rs. 98,09,592/- for the period 2016-17 and up to June 2017. The Tribunal, however, found that the demands were not sustainable as the services did not fall under 'Business Auxiliary Services'. The Tribunal referenced previous decisions which held that the freight element or any profit on such freight cannot be subjected to tax under 'Business Auxiliary Services'.

3. Interest on the Demanded Service Tax:
The Commissioner directed the appellant to pay interest at the appropriate rate under Section 75 of the Finance Act, 1994, on the confirmed demands. Given that the Tribunal found the demands themselves to be unsustainable, the direction to pay interest was also set aside.

4. Imposition of Penalties:
The Commissioner imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994, for various contraventions, including non-payment of Service Tax and suppression of information. The Tribunal, however, set aside these penalties, referencing the previous decisions which clarified that the services in question were not taxable under 'Business Auxiliary Services'. The Tribunal noted that the arguments presented by the Revenue were identical to those previously considered and rejected in similar cases.

Conclusion:
The Tribunal found that the issue was squarely covered by previous decisions which held that the services provided by the appellant did not fall under 'Business Auxiliary Services'. Consequently, the demands for Service Tax, interest, and penalties were set aside, and the appeal was allowed. The Tribunal emphasized that the transactions in question were principal-to-principal transactions and not agency functions, thereby not attracting Service Tax under the disputed category.

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