2023 (8) TMI 123 - AT - Service Tax

Classification of services - steamer agent service or not - amount received by them as brokerage - extended period of limitation - HELD THAT - The factual position as emerged from the entire discussion is that appellant were engaged in booking, canvassing or advertising cargo as sub agent of various shipping lines. The work undertaken by the appellant is primarily on behalf of the steamer agent namely M/s. Freight Connection India Pvt. Limited and thus the work which was to be undertaken by the main steamer agent M/s. Freight Connection India Pvt. Limited was done by the appellant and for which certain brokerage was paid to them. In reality the work of steamer agent was performed by the appellant as sub-agent of the main steamer agent. Therefore, the services rendered by the appellant will be rightly classifiable under the category of steamer agent - the decision of the Larger Bench in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. 2019 (6) TMI 518 - CESTAT NEW DELHI noted, wherein it has been categorically held that it is not open to a sub-agent contend that he should subject to service tax liability in respect of service tax liability when the main contractor has paid service tax on the gross amount. Thus, since the appellant being a sub-contractor has provided the service of the steamer agent, they are liable to pay service tax. Extended period of limitation - proviso to Section 73 of Finance Act, 1994 - HELD THAT - There has been a lot of confusion and mis-understanding in the trade whether the sub-agent need to pay service tax on the amount charged by them from the main contractor/ agent who has already discharged service tax liability on the gross amount - it is found that appellant were under the bonafide belief that no service tax was payable on the brokerage received by them for providing steamer agent service being a sub-agent - also, all the transactions between the appellant and M/s. Freight Connection India Pvt. Limited are recorded in the books of accounts - extended time to demand service tax under Section 73 is not invokable. The appellant are liable to pay service tax on the service provided by them as steamer agent however, the demand confirmed by invoking extended time proviso under Section 73 need to be set-aside - show cause notices issued within normal period to demand service tax is sustainable - Appeal allowed in part.

Summary

Issues involved:
The issues involved in the judgment are whether the appellant is liable to pay service tax on the amount received as brokerage under the category of steamer agent service, and whether the extended period under the proviso to Section 73 of the Finance Act, 1994 can be invoked.

Issue 1: Liability to pay service tax on brokerage income:
The appellant, working as a sub-agent of a Steamer Agent, was providing services under the categories of 'Business Auxiliary Services' and 'Business Support Services'. The appellant received commission as consideration for services provided to M/s. Freight Connection India Pvt. Limited. The department raised a demand for service tax on the commission received by the appellant, citing non-payment of service tax prior to 03.04.2006. The appellant contended that they did not provide services of a Steamer Agent to any shipping line and that the department's interpretation was incorrect. However, the Tribunal held that the services rendered by the appellant fell under the category of a steamer agent, as they were engaged in booking, canvassing, or advertising cargo on behalf of shipping lines. The Tribunal concluded that the appellant, as a sub-agent, was liable to pay service tax on the brokerage income received.

Issue 2: Invocation of extended period under Section 73:
The appellant argued that they were under a bonafide belief that no service tax was payable by them as the principal agent, M/s. Freight Connection India Pvt. Limited, was discharging the service tax liability. They contended that the extended time proviso under Section 73 should not be invoked as there was no intention to evade payment of service tax. The Tribunal acknowledged the confusion in the trade regarding the tax liability of sub-agents and held that the appellant's belief was bonafide. As all transactions were recorded in the books of accounts, the Tribunal found that the extended time to demand service tax under Section 73 was not applicable. Therefore, the demand confirmed by invoking the extended time proviso was set aside, and the show cause notices issued within the normal period to demand service tax were upheld.

Conclusion:
The Tribunal held that the appellant was liable to pay service tax on the services provided as a steamer agent but set aside the demand confirmed by invoking the extended time proviso under Section 73. The appeals against the show cause notices issued within the normal time period were dismissed, while the appeal was partly allowed concerning the non-acceptance of the invocation of the extended time proviso.