2024 (1) TMI 894 - AT - Service Tax

Levy of service tax - Steamer Agent Service - excess ocean freight collected and retained by them for transportation of the goods to foreign destinations - HELD THAT - There are merit in the contention of the learned advocate for the appellant. Analysing the transaction between the appellant, their customers and shipping lines, we find that the appellant do not act as agents of the shipping line for booking the cargo space or for canvassing or booking of the cargo space for their customers. They purchase the cargo space on behalf of the customers from the shipping lines on principal-to-principal basis. The excess ocean freight collected from the customers, thus cannot be considered as a commission paid by the shipping lines to the appellant. Whether Service Tax be leviable on the excess ocean freight collected from the customers is the issue now needs to be addressed. This issue of chargeability of Service Tax on excess ocean freight retained by the service provider is no more res integra and considered by the Tribunal in a series of cases. Recently, the Principal Bench in M/S. BALMER LAWRIE CO. LTD. VERSUS THE COMMISSIONER OF SERVICE TAX DELHI II COMMISSIONERATE, NEW DELHI AND THE COMMISSIONER OF SERVICE TAX DELHI II COMMISSIONERATE, NEW DELHI VERSUS M/S. BALMER LAWRIE CO. LTD. 2023 (5) TMI 100 - CESTAT NEW DELHI held that This activity is a business in itself on account of the appellant and cannot be called a service at all. Neither can the profit earned from such business be termed consideration for service. There are no merit in the impugned order, consequently, the same is set aside - appeals are allowed.

Summary

Issues involved:
The issues involved in the judgment are whether the appellant is liable to pay Service Tax for the excess ocean freight collected and retained by them for transportation of goods to foreign destinations under the taxable category of 'Steamer Agent Service'.

Summary:

Issue 1: Appellant's liability for Service Tax on excess ocean freight collected:
The appellant, registered under 'Clearing and Forwarding Agency Service' and 'Business Auxiliary Service', collected excess ocean freight for transportation of goods to foreign destinations. The department proposed Service Tax on this excess amount under 'Steamer Agent Service'. The appellant argued that they act as principals, not agents, and the excess freight collected is not commission but ocean freight charges. The Tribunal analyzed the transactions and found the appellant does not act as agents of shipping lines, hence the excess freight cannot be considered commission. Citing precedent cases, including Balmer Lawrie and Co. Ltd. vs. CST, the Tribunal held that the excess ocean freight collected is not liable to Service Tax.

Decision:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief, if any, as per law.