2009 (3) TMI 158 - AT - Service Tax

Tribunal rules in favor of freight forwarding company in tax dispute

The Tribunal ruled in favor of the appellant, a company providing freight forwarding and logistics services, in a tax dispute regarding Customs House ... Customs House Agent (CHA) – Clearing and Forwarding Agent (C&F) – held that - We are of the considered opinion that the activity relating to one of the categories could not be subjected to service tax under any other category. In other words, the activities relating to Freight forwarding cannot be brought under CHA. The appellant had clearly explained the nature of the charges collected such as Charge Collect fees, Break bulk fees, Profit share from margin, unallocated income, Currency adjustment factor, Air/sea Freight rebate, Commission/Brokerage, Air freight incentive, Expenses reimbursement billing, etc. - The various reimbursement of the taxable services relating to CHA in terms of even the Board’s Circular dated 6-6-1997. In these circumstances, even the de novo order suffers from various defects. In the impugned order, the Adjudicating authority has stated that the assessee did not furnish Complete accounts duly certified by a chartered accountant. Hence we have no other option but to remand the matter to the Original authority Issues Involved:1. Taxability of various charges under Customs House Agent (CHA) services.2. Taxability of charges under Clearing and Forwarding Agent (CFA) services.3. Inclusion of income from CFA services under CHA services.4. Reimbursement of expenses related to CHA services.Detailed Analysis:1. Taxability of Various Charges under CHA Services:The appellant, engaged in freight forwarding, customs clearance, and logistic services, contested the inclusion of several charges under CHA services. The charges in question were:- Charge Collect fees (CCX fees)- Break Bulk fees- Profit share from origin- Unallocated income- Currency Adjustment Factor (CAF)- Freight rebate- Airline commission and sea freight brokerage- Air freight incentives- Expenses reimbursement billingThe appellant argued that these charges relate to freight forwarding services, which are distinct from CHA services. For instance, CCX fees are collected for the service of collecting freight from the consignee, not for CHA operations. Break Bulk fees represent profit sharing among group entities and are not related to CHA services. Similarly, other charges like CAF, freight rebate, and airline commission are linked to freight forwarding and not CHA services.The Tribunal agreed with the appellant, noting that the activities related to freight forwarding cannot be taxed under CHA services. The Tribunal emphasized that the Commissioner should have examined each charge individually, which was not done. Consequently, the Tribunal remanded the matter to the Original authority for re-examination, allowing the appellant to produce a Chartered Accountant's Certificate for the deductions claimed.2. Taxability of Charges under CFA Services:The appellant provided logistics services under various contracts, recovering management fees and other charges. They had paid service tax on management fees under CFA services but contested the inclusion of rental income, distribution charges, warehousing, and transportation charges under CFA services.The Tribunal supported the appellant's contention, citing case laws that transportation charges collected under separate agreements are not taxable as CFA services. The Tribunal directed the Original authority to exclude such charges from the taxable value of CFA services.3. Inclusion of Income from CFA Services under CHA Services:The appellant argued that there was an error in the computation of service tax, as income and expenses pertaining to CFA services were included under CHA services. This erroneous inclusion led to an inflated service tax demand.The Tribunal acknowledged this error and instructed the Original authority to correct the computation, ensuring that income from CFA services is not included under CHA services.4. Reimbursement of Expenses Related to CHA Services:The appellant claimed that various expenses incurred and later recovered from customers should not be included in the taxable value for CHA services. They cited a Board's Circular which supports the exclusion of such reimbursements from the taxable value.The Tribunal agreed, noting that the Commissioner had not properly considered the nature of these reimbursements. The Tribunal directed the Original authority to re-examine the reimbursements, allowing the appellant to provide necessary documentation.Conclusion:The Tribunal set aside the impugned order and remanded the matter to the Original authority for re-computation of the tax liability. The Original authority was instructed to provide the appellant an opportunity to submit a Chartered Accountant's Certificate for the deductions claimed. The de novo order should be issued within four months from the date of receipt of the Tribunal's order. The appeal was allowed by way of remand.