Tribunal Rules in Favor of Custom House Agent on Service Tax Dispute

The Tribunal ruled in favor of the Appellant, a Custom House Agent, in a case concerning the demand of service tax on additional charges beyond agency fees. The Tribunal held that the additional charges were reimbursements for third-party services and not subject to service tax under CHA services. Similarly, in a separate issue regarding Business Auxiliary Services, the Tribunal found that the markup on space purchased from airlines and shipping lines did not constitute taxable services under BAS. The Tribunal set aside the demand for service tax, citing precedents in the Appellant's favor and granting consequential benefits as per law.

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Issues Involved:
1. Demand of Service Tax under Custom House Agent (CHA) Services.
2. Demand of Service Tax under Business Auxiliary Services (BAS).

Issue-wise Detailed Analysis:

1. Demand of Service Tax under Custom House Agent (CHA) Services:

The Appellant is engaged in Custom House Agent (CHA) services and pays service tax on the agency fee. However, the department has demanded service tax on additional charges such as documentation, cartage, break bulk, spread share, handling, management, and miscellaneous charges, arguing that these are not mere reimbursements but include substantial mark-ups, thus constituting income for the Appellant.

The Appellant argued that:
- Service tax is already paid on CHA agency services.
- The additional charges do not relate to the taxable service of CHA but are reimbursements for services provided by third parties.
- The CBEC Circular No. 43/1/97 dated 06.06.97 clarified that only agency commissions are liable to tax under CHA services.
- Similar proceedings in the Appellant's Bangalore office were set aside by the Tribunal, which held that such charges are not related to CHA services and cannot be subjected to service tax.

The Tribunal noted that the adjudicating authority had acknowledged that reimbursable expenses should not be taxed but still confirmed the demand based on the income shown in the trial balance. The Tribunal found this contradictory and referenced its own previous decision in the Appellant's case, Bax Global India Ltd., which held that such charges are reimbursable expenses and not related to CHA activities.

2. Demand of Service Tax under Business Auxiliary Services (BAS):

The Appellant purchases space from airlines and shipping lines and sells it to exporters, with a markup over the actual freight. The department contended that this activity falls under BAS as it involves procurement of goods or services, which are inputs for the client.

The Appellant argued that:
- They merely collect and remit freight charges to airlines/shipping liners.
- Air freight for export cargo and ocean freight are not taxable services.
- The markup collected does not alter the nature of the services.
- Pre-booking of container space is an independent business activity, and any profit from this is not taxable under BAS.

The Tribunal referenced its decision in Greenwich Meridian Logistics (I) Pvt. Ltd., which held that the notional surplus from purchasing and selling space is not by acting for a client but as a principal-to-principal transaction. Similarly, in DHL Lemuir Logistics Pvt. Ltd., the Tribunal found that pre-booking of slots and selling them to customers does not conform to the definition of BAS and is not liable to tax.

Conclusion:

The Tribunal found no cogent reason to deviate from the established ratio in the Appellant's own case and similar cases. The impugned order was set aside, and the appeal was allowed with consequential benefits as per law.

Pronounced in court on 18.09.2017.

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