Appellant liable for service tax on brokerage income, but demand set aside due to bonafide belief

The Tribunal held that the appellant was liable to pay service tax on the brokerage income received as a sub-agent of a Steamer Agent. However, the demand confirmed by invoking the extended time proviso under Section 73 was set aside due to the appellant's bonafide belief that no service tax was payable. The Tribunal dismissed the appeals against show cause notices issued within the normal time period but partly allowed the appeal concerning the non-acceptance of the extended time proviso invocation.

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Issues involved:
The issues involved in the judgment are whether the appellant is liable to pay service tax on the amount received as brokerage under the category of steamer agent service, and whether the extended period under the proviso to Section 73 of the Finance Act, 1994 can be invoked.

Issue 1: Liability to pay service tax on brokerage income:
The appellant, working as a sub-agent of a Steamer Agent, was providing services under the categories of 'Business Auxiliary Services' and 'Business Support Services'. The appellant received commission as consideration for services provided to M/s. Freight Connection India Pvt. Limited. The department raised a demand for service tax on the commission received by the appellant, citing non-payment of service tax prior to 03.04.2006. The appellant contended that they did not provide services of a Steamer Agent to any shipping line and that the department's interpretation was incorrect. However, the Tribunal held that the services rendered by the appellant fell under the category of a steamer agent, as they were engaged in booking, canvassing, or advertising cargo on behalf of shipping lines. The Tribunal concluded that the appellant, as a sub-agent, was liable to pay service tax on the brokerage income received.

Issue 2: Invocation of extended period under Section 73:
The appellant argued that they were under a bonafide belief that no service tax was payable by them as the principal agent, M/s. Freight Connection India Pvt. Limited, was discharging the service tax liability. They contended that the extended time proviso under Section 73 should not be invoked as there was no intention to evade payment of service tax. The Tribunal acknowledged the confusion in the trade regarding the tax liability of sub-agents and held that the appellant's belief was bonafide. As all transactions were recorded in the books of accounts, the Tribunal found that the extended time to demand service tax under Section 73 was not applicable. Therefore, the demand confirmed by invoking the extended time proviso was set aside, and the show cause notices issued within the normal period to demand service tax were upheld.

Conclusion:
The Tribunal held that the appellant was liable to pay service tax on the services provided as a steamer agent but set aside the demand confirmed by invoking the extended time proviso under Section 73. The appeals against the show cause notices issued within the normal time period were dismissed, while the appeal was partly allowed concerning the non-acceptance of the invocation of the extended time proviso.

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