2023 (9) TMI 1141 - AT - Service Tax

Service tax not paid properly - Business Support Services - non-disclosure of actual value of service in ST-3 returns - service of information and tracking of delivery schedule - Commission/Brokerage income - Miscellaneous income like Amendment Charges, Container Detention charges etc. not shown in ST-3 return - demand of service tax along with equal amount of tax as penalty under Section 78 of the Finance Act, 1994. Service Tax on income arising from providing service of information and tracking of delivery schedule - HELD THAT - The space for transportation of containerized goods outside the territorial water of the country has been bought by the Appellant company in a bulk and thereafter sold to other companies on principal to principal basis. In this sale they earn a margin of profit over the cost incurred by them on such bulk purchase. Since this transaction is entirely conducted on principal-to-principal basis and not on Principal - to - Agent basis, the income derived would not fall within the ambit of Business Support Service. As per the definition of Business Support Service, any activity which is rendered on behalf of another person ie, when the relationship is in the nature of principal-toagent, then only such activity is liable to service tax under the category of Business Support Service. In the instant case, the Appellant were buying the space for transportation of containerized goods outside the territorial water of the country and selling the same to their clients in their own capacity and is not obligated to work on principal-to-agent relationship. Accordingly, the income received by the Appellant is not liable to service tax under the category of 'Business Support Service' as confirmed in the impugned order - the demands confirmed in the impugned order on this count is not sustainable. Service tax on Commission/Brokerage income - HELD THAT - The Appellant buy space for transportation of containerized goods outside the territorial waters of the country from Shipping Lines and selling the same to their clients in their own capacity. Hence, the relationship with the Shipping Lines as well as the customers is on principal-to-principal relationship. They obtained discounts from the Shipping Lines on account of bulk purchase of space in the ships. Such discount provided on account of purchase is outside the ambit of service tax - the Appellant was instrumental in providing business in bulk quantities to the shipping lines. This discount amount is, thus, connected with the act of bulk purchase of space in the ships and is received for selling of space outside the country in course of shipment of cargo. It is observed that the discount was billed as well as received in foreign currency. Therefore, it satisfies the main part of Rule 10 of the POP Rules which provides that the place of provision of services shall be the place of destination of the goods, which is outside India. In the instant case the facts on record conclusively establish that each of the applicable clauses of Rule 6A(1) stands duly satisfied. Since export of services is outside the purview of service tax under the Act, the demand of service tax of Rs.17,54,528/-in the impugned order is not sustainable. Service Tax on Miscellaneous income like Amendment Charges, Container Detention charges etc. not shown in ST- 3 return - HELD THAT - As per Rule 10 of the Place of Provision of Services Rules 2012, the place of provision of the service of transportation of goods by air/sea, other than by mail or courier, is the destination of the goods. It follows that the place of provision of the service of transportation of goods by air/sea from a place in India to a place outside India, will be a place outside the taxable territory. In this case also, the requirement of Rule 6A of the Service Tax, 1994, as amended, stands duly satisfied. Accordingly, these charges are within the purview of the Export of Service Rules and hence outside the service tax net - the Appellant have been paying service tax for the considerations received as Amendment Charges, Container Detention Charges, Customer Administrative Charges, DTHC Charges, Handling Fees, Seal Charges and other charges when charged on Indian customers in Indian Currency. In view of the above findings, the demand confirmed in the impugned order on this count is not sustainable. Time Limitation - Penalty - suppression of facts or not - HELD THAT - In this case there was no evidence brought on record to establish suppression of facts with an intention to evade payment of tax. It is a settled principle that in order to invoke the extended period of limitation, it is necessary to establish that there has been intent to evade payment of the tax by means of fraud, collusion etc. These ingredients postulate a positive act of fraud or collusion or willful misstatement or suppression of facts, which are absent in this case. Accordingly, the demands confirmed in the impugned order are not sustainable on the ground of limitation also. For the same reason, the penalty imposed under Section 77 and 78 of the Finance Act, 1994, is also liable to be set aside. Impugned order set aside - appeal of Revenue dismissed.

Summary

Issues Involved:

1. Service Tax on income from providing service of information and tracking of delivery schedule.
2. Service Tax on Commission/Brokerage income.
3. Service Tax on Miscellaneous income like Amendment Charges, Container Detention charges, etc.
4. Limitation period for demand and penalties.

Summary:

1. Service Tax on income from providing service of information and tracking of delivery schedule:

The Appellant argued that the income pertains to Ocean Freight, derived from transporting containerized goods internationally, sold on a principal-to-principal basis, not as a Business Support Service. The Tribunal held that since the transaction is principal-to-principal, it does not fall under 'Business Support Service' as per Section 65 (105) (zzzq) of the Finance Act, 1994. The Tribunal referenced several decisions supporting this view, including Direct Logistics India Pvt. Ltd. Vs. Commissioner of S.T. 2021 (55) GSTL 344 (T), and concluded that the demand is not sustainable.

2. Service Tax on Commission/Brokerage income:

The Appellant claimed this income was from discounts received on bulk space purchases from Shipping Lines, not services rendered as an agent. The Tribunal observed that the relationship with Shipping Lines and customers was principal-to-principal. The discounts, billed and received in foreign currency, satisfied Rule 10 of the POP Rules and Rule 6A of the Service Tax Rules, 1994, thus qualifying as export of services. The demand of Rs.17,54,528/- was deemed unsustainable and set aside.

3. Service Tax on Miscellaneous income like Amendment Charges, Container Detention charges, etc.:

The Appellant contended these charges were collected in foreign currency for services related to onward movement of goods from India, qualifying as export services. The Tribunal agreed, noting that these charges fall under Rule 10 of the Place of Provision of Services Rules 2012 and Rule 6A of the Service Tax Rules, 1994. The demand of Rs.16,64,393/- was found unsustainable and set aside.

4. Limitation period for demand and penalties:

The Appellant argued the demand was barred by limitation, as there was no suppression of facts with intent to evade tax. The Tribunal found no evidence of fraud, collusion, or willful misstatement, thus ruling the extended period of limitation inapplicable. Consequently, the demands and penalties under Sections 77 and 78 of the Finance Act, 1994, were set aside.

Conclusion:

The Tribunal set aside the demands and penalties confirmed in the impugned order and allowed the Appellant's appeal. The department's appeal was rejected. The judgment emphasized the principal-to-principal nature of transactions and the applicability of export of services rules, leading to the conclusion that the demands were unsustainable.