Service tax not applicable on notional surplus charged for ocean freight. Impugned order set aside.

The Tribunal held that the demand for service tax on ocean freight collected by the appellants could not be sustained. Referring to precedent cases, the Tribunal concluded that notional surplus charged for ocean freight is not subject to service tax. Therefore, the impugned order confirming the service tax demand, interest, and penalty was set aside, and the appeal was allowed with any consequential relief.

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Issues:
1. Levy of service tax on ocean freight collected by the appellants under various service categories.

Analysis:
The case involved the appellants registered under multiple service categories, including Steamer Agent Service, Goods Transport Agency Service, Business Auxiliary Service, and Business Support Service. During an audit, it was discovered that the appellants had been collecting amounts in the form of ocean freight. The department contended that these amounts were subject to service tax under Business Auxiliary Service, leading to a show cause notice proposing the levy of service tax. The original authority confirmed the demand, along with interest and imposed a penalty, which the appellants contested before the Tribunal.

The appellants argued that they act as a steamer agent and receive commission from liners for cargo bookings, on which they have already paid service tax. They explained that the ocean freight collected from customers for imports or exports is subsequently paid to the liner and should not be subject to service tax. They cited a previous Tribunal decision in the case of Bax Global India Ltd. vs. Commissioner of Service Tax (2008) 9 STR 412 to support their position. Additionally, they referenced a decision by the Hon'ble Apex Court in Union of India vs. Inter Continental Consultants and Technocrafts Pvt Ltd.

The respondent, represented by the Ld.AR, supported the findings of the impugned order, arguing in favor of the service tax demand on ocean freight. After hearing both sides, the Tribunal deliberated on the issue of service tax on ocean freight. Referring to previous decisions, including the case of Greenwich Meridien Logistics (I) Pvt. Ltd. v. Commissioner of Service Tax Mumbai [2016 (4) TMI 547-CESTAT-MUMBAI-2016 (43) S.T.R.215 (Tri.-Mum.), the Tribunal concluded that notional surplus charged for ocean freight is not subject to service tax. Consequently, the Tribunal held that the demand for service tax on ocean freight could not be sustained, setting aside the impugned order and allowing the appeal with any consequential relief. The operative part of the order was pronounced in open court.

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