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TMI Blog2023 (12) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... ) TMI 455 - CESTAT NEW DELHI] held that the activity is trading of cargo space and there is no rendering of service. The demand of Service Tax on mark-up / differential of ocean freight was set aside. In the case of M/S. DIRECT LOGISTICS INDIA PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX BANGALORE SERVICE TAX- I [ 2021 (9) TMI 500 - CESTAT BANGALORE] , the demand was raised on the mark-up received on the difference between the freight charges collected and paid to the shipping liners where it was held that no service tax is chargeable on the difference between the ocean freight collected from the clients and the ocean freight paid to the shipping lines. The Tribunal in the case of M/S. EMU LINES PVT. LTD. VERSUS COMMISSIONER OF CGST CE, BELAPUR [ 2023 (6) TMI 64 - CESTAT MUMBAI] had considered the very same issue where the demand of Service Tax was raised under Business Auxiliary Services. It was held by the Tribunal that the activity does not amount to rendering of service and it is merely trading of cargo space. The said decision was upheld by the Apex Court in COMMISSIONER OF CGST AND CE BELAPUR VERSUS M/S EMU LINE PVT. LTD. [ 2023 (2) TMI 1155 - SC ORDER] . Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping companies for the provision of international freight services for the transportation of cargo in the containers, to destinations located in India. 2.4 The appellant collects the negotiated and agreed amount from the customers, as Ocean Freight / Air Freight Charges both in the case of exports and imports. These charges vary from customer to customer, depending on the destination and size of the containers. However, on verification of invoices by the Department, it was noted that the amount collected as ocean freight charges by the appellant from their customer is more than the ocean freight charges paid to the shipping companies. 2.5 The Department was of view that the appellant has arranged for the transportation of cargo of their customer and do not themselves provide the international freight service. The appellant had only made arrangements with the shipping companies for the provision of international freight service for the transportation of the goods on their own account. The activity of the appellant in arranging transportation of the cargo amounts to service provided to the exporter for arranging the international freight services. Though the appellant colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity does not involve rendering of service and it is mere buying and selling of cargo space for the purpose of transport of goods by ocean / air on principal-to-principal basis. Ocean freight and air freight is not subject to levy of Service Tax. With effect from 2016, though freight charges for transportation of goods by way of air is subject to levy a Service Tax, the liability to pay Service Tax is on the air liners. The demand raised on the appellant is against the provisions of law. 3.3 The Ld. counsel submitted that the issue stands covered by various decisions. In the case of M/s. Tiger Logistics (India) Ltd., Vs. Commissioner of Service Tax-II, Delhi [2022 (63) GSTL 337 (Tri. Del.)], the very same issue was considered, the demand was set aside on the ground that the activity is mere trading of cargo space and not rendering of service. In the case of EMU Lines Pvt. Ltd. Vs. Commissioner of CGST Central Excise, Belapur [2023 (4) CENTAX 122 (Tri.-Bom.)], the very same issue was considered and the period involved is from 2009 to 2014, the demand was made under the category of Business Auxiliary Services (BAS). The Tribunal set aside the demand holding that it is mere purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant. In turn, it sells the space to its customers and issues a House Bill of Lading to each of them. The first leg is the contract between the Shipping line and the appellant. The second leg is the contract between the appellant and its customers. Evidently, anyone who trades in any merchandise or service buys low and sells high and the margin is his profit. To earn this profit, he also takes the risk of being unable to sell. In the appellant s case, if the space on the ships which it bought cannot be sold to its customers fully, or due to market conditions, or is compelled to sell at lower than purchase price, the appellant incurs loss. In a contrary situation, it gains profits. 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. Respectfully following Satkar Logistics, Nilja Shipping Pvt. Ltd., Surya Shipping and ITC Freight Services, we hold that the appellant is not liable to pay service tax. . . . 18. We find that the only allegation of these elements held against the appellant in the impugned order is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant buys space on the ship in anticipation of the clients requirements and then sells the space to the clients. Trading in Ocean Freight is not a service being rendered to the client and no amount is being paid by the client to the appellant as per the records towards trading of cargo space. Evidently as any prudent business would, the appellant is buying space on the cargo ship at a lower price and selling it to its client at a higher price. The difference is its profit. It would have been a different case, if the appellant is organizing space on the ship for their clients and the client is paying shipping line directly and the service of organizing or arranging the space on the ship, the appellant gets paid service charge by the client. In such an arrangement, the amount being received would be a consideration for the service. The present arrangement is an arrangement of the trader who buys cargo space at a lower price and sells it at a higher price and enjoys the margin as profit. 15. The nature of the transaction is also clear from the fact that there are cases on record where the appellant had booked the space for higher amount on the ship but due to market ..... X X X X Extracts X X X X X X X X Extracts X X X X
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