Tribunal allows appeal, sets aside service tax demand on ocean freight, container charges, toll taxes

The tribunal partially allowed the appeal, setting aside the demand for service tax on markup on ocean freight, container detention charges, and toll taxes. It ruled that the service tax paid with interest was covered by section 73(3), invalidating the SCN to that extent. Penalties under sections 77 and 78 were waived, but the request for a refund of the service tax already paid was denied. The tribunal modified the impugned order accordingly.

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Issues Involved:
1. Service tax on markup/differential of ocean freight, detention charges, and toll tax.
2. Demand beyond the period of five years from the date of SCN.
3. Penalties under Sections 77 and 78.

Detailed Analysis:

1. Service Tax on Markup/Differential of Ocean Freight:
The appellant, a multi-modal goods transporter, booked cargo space on ships and resold it to customers. The differential between the purchase and sale price of this space was demanded as service tax under the category of Business Support Service (BSS) up to 30.6.2012 and under section 66B read with section 66D from 1.7.2012. The tribunal observed that this activity is a business in itself and cannot be called a service. The profit earned from such business cannot be termed consideration for service. The tribunal followed precedents set by various benches, concluding that no service tax is leviable on this amount.

2. Service Tax on Container Detention Charges and Toll Tax:
The tribunal noted that container detention charges are penal rents charged by the shipping lines for containers held beyond the free period, and toll tax is a reimbursement from customers. Both these charges do not constitute a service element. The tribunal referred to CBEC Circular No. 121/2/2020-ST and the South Eastern Coalfields case, which clarified that such charges are not exigible to service tax. Thus, the demand of service tax on these charges was set aside.

3. Invocation of Extended Period of Limitation:
The tribunal examined whether the elements of fraud, collusion, willful misstatement, suppression of facts, or contravention of any provisions with intent to evade payment of duty were present. The Commissioner had concluded that there was suppression of facts because the appellant did not disclose the full value of taxable services in their ST-3 returns. However, the tribunal found that mere omission does not constitute suppression with intent to evade payment of duty. The appellant had recorded all transactions and provided full facts during the investigation. Therefore, the tribunal held that the extended period of limitation was not applicable, and the case was covered by section 73(3), meaning no SCN should have been issued.

4. Demand for the Period October 2009 to March 2010 Beyond the Extended Period of Limitation:
The tribunal noted that even in cases of fraud or suppression, demands can only be raised within five years. Therefore, the demand for this period was set aside.

5. Penalties Under Sections 77 & 78:
The tribunal found that the appellant had paid the service tax along with interest before the SCN was issued, which should have prevented the issuance of the SCN under section 73(3). The tribunal also noted that the suppression of facts was not proved, and the appellant had made out a case for waiver of penalties under section 80. Consequently, penalties under sections 77(1) and 77(2) were set aside.

6. Prayer for Refund of Service Tax Paid:
The tribunal rejected the appellant's prayer for a refund of the service tax already paid, stating that once the service tax is paid, the charge of tax continues to exist, and the limitation period only affects the remedy available to the Revenue, not the underlying liability.

Conclusion:
The tribunal allowed the appeal in part, setting aside the demand of service tax on markup on ocean freight, container detention charges, and toll taxes. It accepted the appellant's plea that the service tax paid along with interest was covered by section 73(3) and invalidated the SCN to that extent. Penalties under sections 77 and 78 were set aside, but the plea for a refund of the service tax already paid was rejected. The impugned order was modified accordingly.

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