Tribunal rules ocean freight mark-up not taxable as service tax, citing profit vs. commission distinction.

The Tribunal held that the mark-up collected on ocean freight by the appellants was not subject to service tax as it constituted profit in the transaction, not commission. Relying on a precedent, the Tribunal determined that the activity was akin to trading and not a taxable service. Consequently, the demand for service tax was set aside, and the appeal was allowed with consequential reliefs. The bench comprising Smt. Sulekha Beevi C.S and Shri Madhu Mohan Damodhar pronounced the judgment.

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Issues:
Service tax liability on mark-up collected on ocean freight by steamer agents.

Analysis:
The appellants, registered under various service categories, were found to have not paid service tax on certain amounts received and retained by them. The original authority confirmed the demand, interest, and penalties, which was upheld by the Commissioner (Appeals), leading to the current appeal. The main contention was regarding the mark-up collected on ocean freight by the appellants. The appellant argued that the transactions were on a principal-to-principal basis and relied on a precedent to support their case. On the other hand, the Revenue argued that the mark-up constituted commission subject to service tax under Business Auxiliary Service.

The Tribunal referred to a previous case involving similar issues and held that mere sale and purchase of cargo space is considered trading and not a taxable activity. The Tribunal emphasized that the mark-up collected by the appellants from exporters was an element of profit in the transaction and not commission earned while acting on behalf of the exporter. It was noted that the appellants were already paying service tax on commission received from airlines/shipping lines. The Tribunal found no impropriety in the original authority's decision to drop the demand based on these findings.

In conclusion, the Tribunal, following the precedent case, held that the demand could not be sustained and needed to be set aside. The impugned order was set aside, and the appeal was allowed with consequential reliefs, if any. The judgment was dictated and pronounced in open court by the bench comprising Smt. Sulekha Beevi C.S, Member (Judicial), and Shri Madhu Mohan Damodhar, Member (Technical).

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