2024 (12) TMI 677 - AT - Service Tax

Appellant wins as buying and selling cargo space ruled not taxable service under Service Tax

CESTAT New Delhi set aside recovery proceedings against appellant for alleged non-payment of Service Tax on mark-up charges for freight income during ... Recovery for alleged non-payment of Service Tax - extra charges collected i.e. mark up for the freight income (ocean freight/air freight) - period of dispute in the matter pertains to 2010-11 to 2014-15 and 1st April 2015 to 30th June 2017 - HELD THAT:- In identical circumstances, the Tribunal vide its order in the case of MARINETRANS INDIA PVT. LTD. VERSUS CST, HYDERABAD - ST [2019 (4) TMI 534 - CESTAT HYDERABAD] had held that buying and selling of cargo space in a ship, does not amount to rendering a service and any profit and income earned through such transactions would not be leviable to Service Tax. Under the circumstances, when the appellant is acting on a principal to principal basis, as regards purchase and selling of space from shipping line/airline and selling to importers/exporters we are of the view that the said act would not amount to an activity liable to Service Tax. This is particularly so when they are not acting as an agent/intermediary for promoting the business of the shipping lines/ and airlines and the transactions of the appellant are independent of both backward and forward integration of the activities performed. The order of the lower authority is set aside - the appeal is allowed Issues:Interpretation of Service Tax liability on mark up collected by a service provider for extra charges, determination of whether the appellant acted as an intermediary or principal in providing transportation services, applicability of Service Tax exemption, and imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.Analysis:The case involved an appeal by M/s. Seagull Maritime Agencies Pvt. Ltd. against a show cause notice issued by the Commissioner of Central Goods & Service Tax, Audit-II, New Delhi, alleging non-payment of Service Tax on mark up collected for extra charges related to transportation services provided by the appellant. The appellant was registered for 'Business Support Service' and was accused of not paying Service Tax on mark up earned from ocean/air freight charges. The department contended that the mark up constituted consideration liable to Service Tax, as the appellant's services were not considered transportation of goods, but rather procurement of services as input service for its clients.The appellant argued that they acted as a principal in providing transportation services by purchasing cargo space from shipping lines/airlines and selling it to importers/exporters. They relied on a CBEC Circular stating that a freight forwarder acting as a principal is not liable to pay service tax when the destination of goods is outside India. The Tribunal noted that the appellant operated on a principal to principal basis and was not acting as an intermediary, as confirmed by previous judgments and the CBEC Circular.Referring to the case of Marinetrans India (P) Ltd. v. CST and Bhatia Shipping (P) Ltd. v. CST, the Tribunal held that buying and selling cargo space did not amount to providing a service subject to Service Tax. The Tribunal emphasized that the appellant's transactions were independent of promoting the business of shipping lines/airlines, and thus, the mark up collected by the appellant was not taxable under Service Tax laws. The Tribunal set aside the lower authority's order and allowed the appeal with consequential relief, if any, as per law.In conclusion, the Tribunal ruled in favor of the appellant, holding that the mark up collected by the appellant for transportation services did not attract Service Tax, as the appellant acted as a principal in the transactions and was not considered an intermediary. The Tribunal's decision was supported by previous judgments and the interpretation of relevant legal provisions and circulars.