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TMI Blog2025 (2) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... ein Rule 5(1) of the Service Tax Valuation Rules, 2006 which provided for inclusion of expenditures or costs incurred by the service provider in the course of providing taxable services, in the value of such taxable services, was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections. The findings in the impugned order in appeal confirming the demand on port congestion charges, port storage charges, seal amendment charges and detention charges cannot sustain and are liable to be set aside. Levy of service tax on differential income representing logistics income - HELD THAT:- This Tribunal in its decision in Tiger Logistics India Ltd v. Commissioner of Central Tax GST, New Delhi, [2023 (7) TMI 546 - CESTAT NEW DELHI] has also, after noticing a number of earlier decisions, held that the demand of service tax on mark up on ocean freight is not tenable in law. In the light of the aforesaid Tribunal decisions, the finding of the appellate authority holding the logistics income of the appellants as exigible to service tax, and demand upheld thereon, is unsustainable and liable to be set aside. Conclusion - i) The finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the said OIO, the appellant preferred an appeal before the appellate authority. The appellate authority held that the port congestion charges, port storage charges, seal amendment charges and detention charges are expenditure or costs incurred by the appellant in the course of providing taxable service and shall be treated as consideration for the taxable services provided and are to be included in the value for the purpose of charging service tax as per Rule 5(1) of the Service Tax (Determination of value) Rules, 2006 (Valuation Rules in short) and further the appellants do not fall under the category of pure agent as the appellants have not fulfilled the required conditions as provided under Rule 5(2) of the Valuation Rules, as to exclude the said charges in terms of the valuation rules. Accordingly the appellate authority upheld the demand of service tax on port congestion charges, port storage charges, seal amendment charges and detention charges. As regards the logistics income, the appellants had contended before the appellate authority that some of their customers seek transport of goods by sea for countries not serviced by their shipping line and for such clients they app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections. The learned counsel further submits that the appellants have earned the logistics/trading income by sale and purchase of cargo space and this Tribunal has already held in the appellants' favour in the appellants' own case as well as in other decisions. 5. Learned Authorised Representative, Shri. Harender Singh Pal appeared for the Department and reiterated the findings in the impugned order in appeal. 6. We have heard both sides, perused the appeal records and the case laws cited by the appellant. 7. We find that the appellate authority has upheld the impugned order in original placing reliance on Rule 5(1) of the Valuation Rules. We find that the issue is no more res-integra in view of the decision of the Honourable Supreme Court in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd, 2018 (10) GSTL 401 (SC) which has considered the issue of liability to pay service tax on reimbursable expenses received by the service provider in the course of rendering services for the client, apart from the consideration received for rendering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'. That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider 'for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. 25. This position did not change even in the amended Section 67 which was inserted on May 1, 2006. Sub-section (4) of Section 67 empowers the rule making authority to lay down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under : "27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of "interpretation of statutes". Vis-a- vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd are liable to be set aside. 9. As regards the demand confirmed on the differential income representing logistics income, we find that this Tribunal in the appellants' own case has held in the appellant's favour by the Final Order Nos.40135-40136/2019 dated 17-01-2019 and the relevant portion of this order is reproduced below: "5. The main allegation against the appellants are that they have collected a mark up on the ocean freight. The Tribunal in the case of M/s. Karam Freight Movers (supra) have analysed the very same issue and held that mere sale and purchase of cargo space is trading and is not a taxable activity. It is trading of cargo space. The relevant discussion is reproduced as under:- " 7. Regarding the brokerage or commission received from airlines or agents, the ld. Counsel submitted that as a CHA regularly involved in shipment of cargo they book cargo space in the ship/airlines, well in advance, and when the actual cargo is shipped, they charge the client on the basis of rate applicable at the relevant time. There is difference in the amount spent for reserving space and the amount they received from the exporters. This amount cannot be subject to service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Centax 117 (Tri-Del) has also, after noticing a number of earlier decisions, held that the demand of service tax on mark up on ocean freight is not tenable in law. In the light of the aforesaid Tribunal decisions, we are of the view that the finding of the appellate authority holding the logistics income of the appellants as exigible to service tax, and demand upheld thereon, is unsustainable and liable to be set aside.
11. In view of the foregoing facts borne out from the records and the discussions and findings stated above, the impugned order in appeal to the extent the demands have been found unsustainable and liable to be set aside are accordingly hereby set aside. The demand of consequential interest on the aforesaid demands set aside also would not sustain and are accordingly hereby set aside. In such facts and circumstances, we are also of the view that the penalties imposed under Section 77 and 78 cannot be sustained and accordingly the penalties imposed are also hereby set aside. The impugned order in appeal stands modified on the aforementioned terms. The appeal is allowed with consequential relief in law.
( Order pronounced in the open court on 12. 02. 2025 ) X X X X Extracts X X X X X X X X Extracts X X X X
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