Ocean freight markup not taxable under Steamer Agent Service where it is only profit over actual freight paid.

Markup retained on ocean freight collected from customers was treated as outside service tax under Steamer Agent Service where it represented only the difference between actual freight paid and the amount collected. The reasoning was that profit on transportation charges has no nexus with the taxable service when it is not intrinsically connected to the service rendered. On that basis, the markup on ocean freight was stated to be not liable to service tax and the demand could not be sustained.

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Issues: Whether the profit or markup earned on ocean freight charges collected from customers could be subjected to service tax under Steamer Agent Service.

Analysis: The dispute concerned only the differential amount retained by the appellant over and above the actual freight paid. The Court relied on the principle that tax cannot be levied on profit arising from transportation charges and held that the markup on ocean freight had no nexus with the taxable service of Steamer Agent Service. The reasoning was supported by the settled position that freight or transportation profit does not form part of the taxable value where it is not intrinsically connected with the service rendered.

Conclusion: The markup on ocean freight was not liable to service tax under Steamer Agent Service and the demand could not be sustained.

Ratio Decidendi: Profit or markup on freight charges, being merely the difference between actual freight paid and amount collected, does not form part of the taxable value for service tax when it is unconnected with the taxable service.

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