Service tax on surplus auction proceeds from abandoned cargo was held not leviable, and the linked penalty failed.

Service tax was held not leviable on the surplus retained by a custodian after auction of unclaimed or abandoned imported cargo, because the amount was not consideration for Storage and Warehousing Service and the issue was already covered by prior tribunal decisions and Board Circular No. 11/1/2002-TRU. On that settled basis, the demand failed, and the connected penalty could not survive once the tax demand itself was unsustainable.

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Issues: Whether service tax was payable on the surplus amount retained by a custodian after auction of unclaimed or abandoned imported cargo, and whether the demand and consequential penalty could be sustained.

Analysis: The Tribunal noted that the issue was already settled by earlier decisions, which relied on Board Circular No. 11/1/2002-TRU dated 01.08.2002 clarifying that service tax is not leviable where the custodian auctions abandoned cargo and the relevant duties, taxes, and charges are duly accounted for. Following that settled view, the Tribunal held that the amounts retained after auction could not be taxed as consideration for Storage and Warehousing Service. Once the demand itself failed, the connected penalty proceedings also could not survive.

Conclusion: The demand of service tax was set aside and the appeal of the assessee was allowed. The Revenue's appeal seeking penalty was dismissed.

Final Conclusion: The Tribunal held that auction proceeds retained from unclaimed cargo were not chargeable to service tax under the cited service category, and the penalty appeal failed as a consequence.

Ratio Decidendi: Service tax is not leviable on a custodian's retention of surplus from auction of abandoned or unclaimed cargo where the activity is covered by the settled circular and prior binding tribunal decisions.

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