2023 (10) TMI 808 - AT - Service Tax

Levy of service tax - mark-up earned over and above by the freight amount by the appellant in view of the sale of cargo space to the exporters - HELD THAT - Reliance upon one such decision in 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 Any amount received must be for the service and it cannot be for some other purpose. For instance, if any amount is received towards any compensation, such amount cannot be taxed. In view of the decision of the Tribunal, it has to be held that the appellant was not liable to pay service tax as no service was provided by the appellant. Appeal allowed.

Summary

Issues Involved:
The judgment involves the demand of service tax on the mark-up earned by a freight forwarder over the freight amount from the sale of cargo space to exporters.

Issue 1 - Demand of Service Tax on Mark-up Earned:
The appellant, a freight forwarder, booked space for export containers with shipping companies and sold this space to exporters at a mutually decided ocean freight rate, which included a mark-up. The department proposed a levy of service tax on this mark-up, which was confirmed. The appellant argued that previous Tribunal decisions, such as Tiger Logistics (India) Ltd. Vs. Commissioner of Service Tax, II, Delhi, supported their position that no service tax should be levied on such mark-ups.

Issue 2 - Tribunal's Decision and Analysis:
The Tribunal considered the provisions of the Finance Act, 1994, and emphasized that if a service is not rendered or does not fall within the definition of a taxable service, no service tax can be levied. The Tribunal highlighted that any amount received must be for the service provided and not for any other purpose. In the case of the appellant, the Tribunal found that the mark-up earned was a result of a business activity rather than a service provided, as the appellant bought space from shipping lines and sold it to customers at a profit margin. The Tribunal noted that the appellant took on the risk of being unable to sell the space at a profit, which indicated a business transaction rather than a service. Citing previous decisions, the Tribunal concluded that the appellant was not liable to pay service tax on the mark-up earned.

Decision:
Based on the Tribunal's analysis and previous decisions, it was held that the appellant was not liable to pay service tax as no service was provided. The orders passed by the Commissioner (Appeals) were set aside, and the appeals were allowed.

This summary provides a detailed breakdown of the issues involved in the judgment and the Tribunal's decision regarding the demand of service tax on mark-up earned by the freight forwarder.