Tribunal rules on service tax case: Expenses excluded from CHA service, cargo trading not taxable

The Tribunal upheld the Original Authority's decision in a case involving non-payment of service tax under Custom House Agent (CHA) service and Business Auxiliary Service (BAS). It ruled that reimbursable expenses should not be included in the taxable value for CHA service and that profit from trading cargo space is not a taxable activity under BAS. The Tribunal dismissed the Revenue's appeal, finding no merit and upholding the Original Authority's findings.

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Issues Involved:

1. Non-payment of service tax on the correct value of taxable service under the category of Custom House Agent (CHA) service.
2. Non-payment of service tax on the commission and brokerage earned on sea/air-freight for shipment of cargo under the category of Business Auxiliary Service (BAS).

Issue-wise Detailed Analysis:

1. Non-payment of service tax on the correct value of taxable service under CHA service:

The Revenue contended that the respondents, while providing CHA services, collected various service charges (such as B/L, DDC charges, GOH container charges, Inland haulage charges, THC, Via Charges, APT tax, AWB fee, AWC charges, MYC Charges, PCA Charges, X-ray charges, etc.) from clients but did not include these charges in the gross value for discharging service tax. The Revenue's position was that these amounts should form part of the gross taxable value for service tax purposes under the category of CHA service. The respondents argued that these charges were reimbursed on an actual basis and there was no evidence of any mark-up in collecting these charges. The Original Authority, after examining the issue in detail and referring to the Board’s clarification dated 21.12.2009, concluded that the reimbursable expenses were indeed on an actual basis and supported by documentary evidence, including invoices and statutory auditor certification. The Tribunal upheld the Original Authority's findings, noting that the Revenue did not present any contrary evidence. The Tribunal also referenced previous decisions (CST Vs. Lee & Muirhead Pvt. Ltd., Aspinwall & Co. Ltd. Vs. CCE, Mangalore, and Suraj Forwarders Vs. CST, Ahmedabad) which held that reimbursable expenses on an actual basis are not to be included in the taxable value for CHA service.

2. Non-payment of service tax on the commission and brokerage earned on sea/air-freight for shipment of cargo under BAS:

The Revenue alleged that the respondents received brokerage and commission from various airlines, shipping lines, and freight forwarding companies for providing cargo-related services and that these amounts should be taxed under BAS. The respondents argued that the income earned from booking cargo space in advance and charging clients based on the applicable rate at the time of shipment was a profit from trading cargo space, not a service. The Original Authority, after examining the issue, concluded that mere sale and purchase of cargo space and earning profit in the process is not a taxable activity under the Finance Act, 1994. The Tribunal agreed with the Original Authority's findings, referencing the decision in Greenwich Meridian Logistic (I) Pvt. Ltd. vs. CST, Mumbai, which held that surplus earned from the purchase and sale of space is not a taxable service under BAS. The Tribunal noted that the respondents were already paying service tax on commissions received from airlines/shipping lines under BAS since 10.09.2004. The Original Authority found that the mark-up value collected from exporters was an element of profit in the transaction and not a commission. The Tribunal found no merit in the Revenue's appeal and dismissed it, upholding the Original Authority's decision to drop the demand.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the Original Authority's findings that the respondents correctly excluded reimbursable expenses from the taxable value for CHA service and that the income earned from trading cargo space was not taxable under BAS. The Tribunal found no contrary evidence presented by the Revenue to challenge these findings.

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