2024 (1) TMI 641 - AT - Service Tax

Levy of Service Tax - Business Auxiliary Service - income earned by the appellant on Ocean Freight - HELD THAT - The logistic companies buy cargo space in shipping lines and thereafter, sell the space to their customers. In various decisions, it has been found that the said activity is purchase and sale of space in Ocean Freight. In identical circumstances, in the case of GREENWICH MERIDIAN LOGISTICS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI 2016 (4) TMI 547 - CESTAT MUMBAI observed 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) of Finance Act, 1994 will not address theses independent principal-to-principal transactions of the appellant and, with the space so purchases being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed. There are no merit in the impugned order the same is set aside - the appeal is allowed.

Summary

Issues:
The appeal involves the demand of Service tax on the income earned by the appellant on Ocean Freight.

Summary:
The appellant, a customs agent, procured space in ships for transportation of cargo/containers of clients, earning a margin reflected as Ocean Freight trading income. The Revenue alleged the income to be commission income chargeable to service tax under "Business Auxiliary Service." The appellant relied on precedents involving logistic companies buying and selling space in Ocean Freight, emphasizing the principal-to-principal nature of transactions. The Tribunal found the appellant's activities akin to multi-model transport operators, engaging in distinct principal-to-principal transactions for space procurement and sale. Consequently, the impugned order was set aside, and the appeal was allowed.

Judgment:
The Tribunal, after considering the submissions, noted the appellant's role as an international freight forwarder and customs agent, akin to logistic companies engaging in purchase and sale of space in shipping lines. Citing relevant precedents, the Tribunal emphasized the principal-to-principal nature of the transactions, where freight charges were considered payment for procured space. Referring to the Multi-model Transportation of Goods Act, the Tribunal highlighted the appellant's responsibility for safe delivery and contractual commitments with carriers, distinct from agency functions. The Tribunal concluded that the appellant's income arose from purchases and sales of space, not from acting for clients with existing space, leading to the setting aside of the impugned order and allowance of the appeal.