Director sitting fees attract service tax with interest but penalty waived for no suppression of facts

CESTAT Kolkata partly allowed the appeal. The tribunal upheld service tax demand on director sitting fees with interest but waived penalty due to no suppression of facts. Demands on commission from shipping lines, cargo handling services, and ocean freight differences were set aside as not constituting taxable services or being mere reimbursements. For GTA services, liability was confirmed only for one invoice worth Rs.4,20,000 where service tax was specifically mentioned, while other demands were rejected as services lacked proper consignment notes.

---

---

Issues Involved:
1. Commission/brokerage received from Shipping Lines
2. Difference on ocean freight collected and paid to shipping lines
3. Cargo handling services
4. Director Sitting fees
5. GTA services

Detailed Analysis:

1. Commission/Brokerage Received from Shipping Lines:
The demand of Service Tax of Rs.10,11,406/- was confirmed on the commission/brokerage received by the appellant from shipping lines. The appellant argued that there was no service provided to the shipping lines and the commission earned was due to booking cargo with the shipping lines. The Show Cause Notice had alleged that the appellant acted as a 'commission agent' liable for service tax under 'business auxiliary service'. However, the Tribunal observed that there was no agreement of 'commission agent' between the appellant and the shipping lines, and the commission earned was not for any taxable service provided. This view was supported by the Larger Bench decision in Kafila Hospitality & Travels Pvt. Ltd. [2021-TIOL-159-CESTAT-DEL-LB], which held that commission earned for selling space by shipping lines is not liable to service tax under 'business auxiliary service'. Thus, the demand was set aside.

2. Difference on Ocean Freight Collected and Paid to Shipping Lines:
The demand of Service Tax of Rs.1,37,14,491/- was confirmed on the profit earned on ocean freight collected and paid during January 2013 to March 2016. The adjudicating authority had held that the profit earned was in the nature of Information and Tracking of Delivery Schedule services. However, the Tribunal found no substantiation for this allegation and observed that the profit was earned from ocean freight. The issue of taxability of profit earned on ocean freight was decided in favor of the appellant in several Tribunal decisions, including Tierra Logistics Pvt. Ltd. (25.09.2023 - CESTAT - Kolkata), where it was held that such profit is not liable to service tax under 'Business Support Service'. Consequently, the demand was set aside.

3. Cargo Handling Services:
The demand of Service Tax of Rs.46,39,520/- was confirmed on amounts received as 'reimbursable expenses' during the provision of CHA services. The appellant argued these were actual expenses related to AD Code Registration charges, Custom Clearance charges, Port charges, EDI Registration charges, AWB fee, etc., and should not be included in the taxable value. The Tribunal relied on the decision in Commissioner of Service Tax, New Delhi v. Karam Freight Movers [2017 (4) G.S.T.L. 215 (Tri. - Del.)], which held that reimbursed amounts on an actual basis are not to be included for Service Tax purposes. Thus, the demand was set aside.

4. Director Sitting Fees:
The demand of Rs.2,96,020/- was accepted by the appellant, who had already paid this amount. The Tribunal upheld the demand along with interest but held that no penalty was imposable as there was no suppression of facts with the intention to evade tax.

5. GTA Services:
The demand of Service Tax of Rs.1,05,68,818/- was confirmed on transportation charges as the recipient of services. The appellant argued that they hired trucks from various individuals and local markets, and no consignment notes were issued by these truck owners. The Tribunal found that most invoices were for 'Hire charges' and not for transportation of goods, except one invoice from M/s. Rishab Trans Management dated 05.01.2017. For this invoice, the appellant was liable to pay Service Tax on the freight amount of Rs.4,20,000/- under GTA Service, along with interest. For the remaining demand, the Tribunal held that the appellant was not liable to pay service tax under GTA service as the services provided by local truck owners did not involve consignment notes. Thus, the demand was largely set aside except for the specific invoice mentioned.

Conclusion:
1. The demand of Rs.10,11,406/- on commission/brokerage was set aside.
2. The demand of Rs.1,37,14,491/- on the profit earned on ocean freight was set aside.
3. The demand of Rs.46,39,520/- on cargo handling services was set aside.
4. The appellant was liable to pay Service Tax on Rs.4,20,000/- under GTA Service along with interest, but the remaining demand under this head was set aside.
5. The demand of Rs.2,96,020/- on Director Sitting Fees was upheld, but no penalty was imposed.

The appeal was disposed of on these terms.

---