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TMI Blog2009 (3) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... have no other option but to remand the matter to the Original authority - ST/389/2007 - 852 OF 2009 - Dated:- 29-3-2009 - T.K. JAYARAMAN, TECHNICAL MEMBER and M.V. RAVINDRAN, JUDICIAL MEMBER N. Prasad for the Appellant. Ms. Joy Kumari Chander for the Respondent. ORDER T.K. Jayaraman, Technical Member. - This appeal has been filed against the Order-in-Original No. 77/2007, dated 2-8-2007, passed by the Commissioner of Service Tax, Bangalore. 2. We heard both the sides in the matter. 3. M/s. DHL Lemuir Logistics (P.) Ltd. (hereinafter referred to as 'appellant' or 'Exel') are engaged in the business of providing taxable services failing under the category of Customs House Agents . The revenue proceeded against the appellant for short payment of service tax under the category of CHA and also in respect of services provided as C F Agent. Accordingly a show-cause notice dated 15-6-2005 was issued to the appellant. The case was adjudicated vide Order dated 31-1-2006. In the said order, the amounts were confirmed by the Commissioner. The appellants were aggrieved over the above order. Consequently they filed an appeal before this Bench. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms clearance services under a separate licence issued under the Customs House Agents Licensing Regulations, 2004. Thus the activities undertaken for freight forwarding and CHA services are totally distinct from each other. Unless the freight forwarding activities are completed, the customs clearance activities cannot commence. The following flow chart is given for the activities of freight forwarding and CHA undertaken by the appellants, along with related documents:- 1. Arrival of Flight in Bangalore Airport 2. Cargo is bonded/handed over to Customs by Airlines based on Airline Manifest copy 3. Airline issues Consol Pouch to Consol Agent Delivery Order 4. Consolidation Agents issues C.A.N. and other documents like HAWB, INVOICE, P/LIST to Customer and their authorized Customs Broker for filing the Bill or Entry at customs for clearance. Consol Activity 5. Consol agents files the consol manife ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unallocated income (e) Currency Adjustment Factor (CAF) (f) Freight rebate (g) Airline commission and sea freight brokerage (h) Air freight incentives (i) Expenses reimbursement billing It is the contention of the appellants that the above charges are related to freight forwarding charges under CHA services. Further the appellants explained the nature of each of these services. (a) CCX Fees- CCX fees (or collect fees) are charged for service of collection and remittance of freight amount from the consignee to the international airline company, related regulatory formalities under foreign exchange remittance, bank charges for remittance of freight, etc. CCX fee is collected from consignee in case of a shipment imported in India on freight to collect basis. In freight to collect shipments, the goods are transported by the airlines and the freight is to be collected from the consignee instead of shipper. It is amply clear that the appellant acts as a collecting agent and collects freight and other charges. For this activity, the appellant collects CCX fees from the consignee. These services are provided by a freight forwarder and are not related to CHA operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represent the consideration received for rendering CHA services. In support, the following documents were cited:- (i) Particulars of inbound shipments for the month of August 2004 indicating the Quantum of break bulk fees i.e, profit margin receivable from Excel Overseas network entities. (ii) Statement of Air/Sea Cargo Consolidation for the month of August 2004 indicating the net amount payable/receivable to/from each of the overseas network entities. (iii) Documents evidencing remittance of net freight after adjusting break bulk fees. It is evident that Break Bulk Fees is a profit shared by the network entity based on a fixed quantum on each shipment. Hence these are not in the nature of fees for rendering CHA services as contemplated in the show-cause notice. (c) Profit share from origin - In case of import or exports shipments transacted through third party agents outside India, on the same basis as in case of Break Bulk fees, the profits are shared between Excel India and the Agents. The same has no connection with the CHA services and hence not taxable under CHA services. In this case also various documents were produced. (d) Unallocated income- The cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buy rate and sell rate is Excel's margin on trading in such cargo space. The margin is referred to as the air freight rebate. The aforesaid is not at all related to any service rendered by Excel. The same represents profits from the selling of cargo space. Such rebate generated by trading in cargo space cannot by any stretch of imagination be said to be a consideration for rendering CHA services. (g) Commission/Brokerage - IATA is a worldwide trade-association of the international air transporters. IATA facilitates co-operation between airlines in order to offer seamless services of the high standard to passengers and cargo consignors. Excel is registered as an IATA agent. Excel can sell air cargo transportation offered by any IATA registered airline to consignors. Excel receives commission from the airlines as a percentage of freight amount charged to consignors. Similar to the booking of air cargo transportation. Excel also sell sea cargo transportation offered by the shipping lines. Excel receives brokerage from the shipping lines for booking space in shipping lines. The commission or brokerage for selling cargo space is not in relation to CHA service. (h) Air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and consignment note indicating the fact that transportation is arranged by Excel on behalf of their customer is enclosed as Exhibit - 17' in the Paper Book. It was submitted that recovery of transportation charges separately is not includible in the taxable value of CFA services. In this regard, reference is being made to the decision of the Tribunal in the case of E.V. Mathai Co. v. CCE 2003 (157) ELT 101/[2007] 7 STT 189 (Bang.-CESTAT) wherein it was held that transport charges collected by CFA under separate bill/agreement connotes a distinct activity would not be taxable as CFA services. It was observed that service tax will be computed on the gross amount of remuneration or commission paid to the CFA by the principal engaging such an agent. Accordingly it was submitted that transportation charges are collected for rendering a distinct service and such charges cannot be included in the gross amount charged for the services rendered as CFA. Reliance was placed on the following decisions :- (i) Sri Sastha Agencies (P.) Ltd. v. Asstt. CCE C [2009] 18 STT 31 (Bang.-CESTAT); (ii) Bhagyanagar Services v. CCE, Salem [2007-TIOL-644-CESTAT-MAD] (sic) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e through the records of the case carefully. The appellants had furnished a flow chart indicating the activities undertaken by them. It is seen that the activities in Sl. Nos. 1 to 6 related to activity of the appellants as freight forwarding. This has been clearly explained by the appellant in the submissions. The point urged was that the appellants are engaged in three distinct activities:- (i) Freight forwarding (ii) Customs House Agent (CHA) (iii) Clearing Forwarding Agent (CFA) We are of the considered opinion that the activity relating to one of the categories could not be subjected to service tax under any other category. In other words, the activities relating to Freight forwarding cannot be brought under CHA. The appellant had clearly explained the nature of the charges collected such as Charge Collect fees, Break bulk fees, Profit share from margin, unallocated income, Currency adjustment factor, Air/sea Freight rebate, Commission/Brokerage, Air freight incentive, Expenses reimbursement billing, etc. We do not want to repeat the same in the findings here. Suffice to say, such charges would not be includable in the computation of the service tax towards CHA s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liability after providing an opportunity to the appellants to produce the Certificate from the Chartered Accountant in respect of every deduction claimed by them. As regards the demand under CFA services, the appellant had made a strong case for non-includability of Rental Income, distribution charges, warehousing and transportation. Such charges are collected under separate contracts. They do not represent the charges for CFA services. The case laws relied on are squarely applicable. The commission received by CFA is only subject to service. As regards the includibility or non-includibility of the various charges, we have already given our findings in this order. That should be borne in mind by the Adjudicating authority. With these observations, we remand the matter to the Original authority for re-computation of the liability. Needless to say that the appellants would co-operate with the Adjudicating authority in providing the chartered accountants certificate in respect of the deductions claimed by them including the erroneous inclusion of the value of CHA services in the computation of the tax liability in the CFA services. The de novo order should be issued within a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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