Principal-to-principal freight transactions are not Business Support Service, so related tax demand, interest and penalties fail.

Ocean freight and air freight collected by a freight forwarder on a principal-to-principal basis were treated as independent transactions, not intermediary activity. The Board circular recognised that where the freight forwarder acts on its own account and assumes contractual responsibility and transportation risk, the service is not to be classified as an intermediary service. Following its earlier decisions, including in the assessee's own cases, CESTAT held that such freight receipts are not taxable as Business Support Service. The corresponding demand, interest and penalties could not be sustained.

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Issues: Whether ocean freight and air freight collected by a freight forwarder on a principal-to-principal basis can be subjected to Service Tax under the category of Business Support Service.

Analysis: The freight forwarder's transactions with shipping lines and airlines, and its onward allotment of cargo space to customers, were treated as independent principal-to-principal arrangements. The circular issued by the Board recognized that where a freight forwarder acts on its own account and assumes the contractual responsibility and risk for transportation, the activity is not to be treated as an intermediary service. The Tribunal also followed its earlier decisions, including decisions in the assessee's own cases, which held that ocean freight collected in such transactions is not liable to Service Tax under Business Support Service.

Conclusion: The ocean freight and air freight collected on principal-to-principal basis are not taxable as Business Support Service, and the demand, interest, and penalties cannot be sustained.

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