Freight forwarding and SEZ exemption issues led to partial stay relief and a conditional pre-deposit order.

Freight collected by a freight forwarder and remitted to shipping lines was held prima facie not to be consideration for Business Support Service, so no pre-deposit was required on that component and interim relief was granted. For services rendered to Special Economic Zone units, exemption under Notification No. 4/2004-ST depended on whether the services were actually consumed within the SEZ, a factual issue that could not be conclusively decided at the stay stage. Partial relief was therefore granted on that issue, with a pre-deposit directed and the balance waived subject to compliance.

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Issues: (i) Whether freight collected by a freight forwarder from customers and remitted to shipping lines could be treated as consideration for Business Support Service and made liable to service tax for the purpose of pre-deposit; (ii) Whether services rendered to Special Economic Zone units were prima facie eligible for exemption under Notification No. 4/2004-ST dated 31.03.2004, warranting waiver of pre-deposit.

Issue (i): Whether freight collected by a freight forwarder from customers and remitted to shipping lines could be treated as consideration for Business Support Service and made liable to service tax for the purpose of pre-deposit.

Analysis: The freight amount represented ocean transportation charges collected on behalf of shipping lines. Such freight could not, on a prima facie view, be classified as Business Support Service for levy of service tax. The issue was covered by earlier Tribunal decisions relied upon for granting interim relief.

Conclusion: No pre-deposit was called for on the freight component and the assessee succeeded on this issue.

Issue (ii): Whether services rendered to Special Economic Zone units were prima facie eligible for exemption under Notification No. 4/2004-ST dated 31.03.2004, warranting waiver of pre-deposit.

Analysis: The entitlement to exemption depended on whether the services were actually consumed in the Special Economic Zone or outside it. That question required service-wise factual examination and could not be conclusively decided at the stay stage. The claim for exemption was therefore not accepted in full at this stage.

Conclusion: A pre-deposit of Rs. 25 lakhs was directed on this issue and balance dues were waived subject to compliance.

Final Conclusion: Interim relief was granted fully on the freight classification issue and only partial relief was granted on the Special Economic Zone exemption issue, resulting in a conditional stay order.

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