Leviability of service tax on excess freight income denied where profit share in multimodal forwarding is business profit, not taxable.

Issue concerns leviability of service tax on excess income earned from ocean freight under the category of Business Auxiliary Service. The reasoning emphasises that such excess represents business profits rather than a taxable service, and that profit sharing between principals jointly delivering multimodal freight services across different jurisdictions cannot be treated as a service transaction; consequent outcome is non-leviability of service tax on that excess. Reliance on prior tribunal decisions, including the appellants own earlier favourable order, supports application of those precedents and dictates the same result for the period under consideration.

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Issues: Whether service tax is leviable on excess income (profit/markup/profit share) earned by a freight forwarder from ocean freight transactions under the category of Business Auxiliary Service (Section 65(19) of the Finance Act, 1994).

Analysis: The appeal involves transactions where the freight forwarder procures carriage (space/slots) and jointly performs multimodal transport with overseas counterparts, sharing profit or loss under commercial arrangements. Judicial authorities cited establish that where the activity constitutes purchase and sale of carriage capacity or principal-to-principal commercial dealings (including allocation of procured space and attendant market risk), the surplus arises from business profits and not from provision of a service to the overseas freight forwarder. Under that legal framework, such profit/markup is not consideration for a taxable service within the scope of Business Auxiliary Service in Section 65(19) of the Finance Act, 1994. Prior tribunal decisions, including the appellant's own earlier period decision, have set aside similar demands and held service tax not leviable on such profit sharing in comparable facts. Applying those precedents and the principal-to-principal analysis to the facts of the present case leads to the same conclusion.

Conclusion: Service tax is not leviable on the excess income earned as profit/markup/profit share from the ocean freight transactions under the category of Business Auxiliary Service; the appeal is allowed in favour of the assessee.

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