TaxTMI 
TaxTMI 
2017 (9) TMI 1264
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....reak bulk charges, spread share charges, handling charges, handling charges, miscellaneous charges, etc. The Appellants pay service tax only on the agency fee / management fee and other charges are claimed as reimbursement of expenses. The reimbursable expenses are not the actual cost of the said expenses but with substantial mark-up and as such an income for the Appellant. These expenses are in relation to CHA service. These charges are to be included in the taxable value under CHA service and Service Tax is payable on such charges. b) Business Auxiliary Services (BAS) The Appellant purchases space from Airlines and Shipping Lines for various exporters. Freight charges collected from the customers are not actuals and there is a markup over the actual freight. Procurement of space in the ship or airlines for the client exporters is classifiable under BAS under the category of procurement of goods or services, which are inputs for the client (Section 65 (19)(iv) of the Act. The mark up earned on the freight constitutes the consideration for rendering the said service. Similarly in respect of cartage income earned under Goods Transport Agency services, the difference between the i....
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.... (vi) No tax can also be demanded against services which are not provided by the Appellant and which are not related to the agency function, and which are not taxable under any other category. These services are in relation to export and import freight which are not taxable service. If a service is exempted or not taxable, the margin earned on such service is also not taxable. No service tax can also be levied in the case of export of services. (vii) In the Appellant s own case relating to their Bangalore Office, similar proceedings were initiated pertaining to the period 2000-01 to 2003-04. The Tribunal, in Final Order dated 25/10/2007, reported in 2009 (9) STR 412 (Tri.Bang.), held that air freight is not a service rendered by CHA and the various such activities on which demand of Service Tax has been made are not related to CHA Service. These charges are charges collect fee, Delivery Order fee, Currency Adjustment Fee, Cartage Revenue, etc., which are also the subject matter in the present appeal. The Tribunal also held that even if any profit has been made on these activities, the same cannot be subjected to Service Tax. Further, similar proceedings initiated earlier was set....
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....e impugned order to contend that the adjudicating authority had clearly found and concluded that reimbursement expenses charges collected in the invoices need not be subjected to service tax, and has referred to Board s instructions dt. 6.6.1997 in support of his view. However, in spite of such findings, the ld. Adjudicating authority has nonetheless merely confirmed the tax demands proposed in the SCN along with imposition of penalties. 3.1 On the other hand, Ld. A.R on behalf of Revenue supports the adjudication. 3.2 He submits that the demand is only on the mark up charges and not on the total gross income. He takes us to page 12 of the impugned order where the adjudicating authority has clearly held that assessee has collected more than the actual expenses incurred on behalf of client and that the excess amount collected is an income to the assessee while rendering the taxable service and therefore this income / profit would form part of the taxable value. 3.3 It cannot be stated that appellant is acting as a pure agent as they do not receive only the actual amount incurred to procure such goods and services but they also collect certain amounts over and above the expenses i....
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....he various costs collected from their clients i.e appellants have collected an amount over and above the actual cost incurred which will be in the nature of commission. Presumably, for this reason, the adjudicating authority, while admitting to the non-inclusibility of reimbursable charges in taxable value, has nonetheless proceeded to confirm the demand proposed in the SCN. Impugned order is self- contradictory . On one hand, the adjudicating authority has clearly weird to the correct thinking that reimbursable expenses cannot be taxed. He even concludes in para 18.5 that certain amounts over and above the expenses incurred by appellant by way of documentation charges, handling charges and miscellaneous charges are liable to be included in the taxable value and service tax liable to be paid on them. Further on, in para, 19.5. he concludes that mark up earned on the freight will constitute consideration for rendering services for procurement of cargo space in airlines / shipping lines and that similar is the case in respect of cartage income earned under GTA services and the difference between income and the cost of cargo is the taxable value. Having reached such a conclusion, we a....
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....ct the amount from the clients. These are actually reimbursable expenses and they do not relate to any CHA activities. In these cases, on going through the statement, we find that in certain cases the appellants had incurred less cost and in certain cases, they had incurred more cost. In any case, the profit or loss incurred in respect of activities which are not related to CHA activities should not be the concern of the Department for the purpose of collecting service tax. The Apex Court s decision in Baroda Electric Meters Ltd. case (supra), even though it relates to the Central Excise, has definitely a bearing on this. If the appellant performs an activity which is not related to the customs house agent then service tax cannot be levied on that activity under the category of CHA services. Similarly, we have seen the break up of all other services. It was already pointed out by the appellants that in certain cases, the appellants directly render certain services which do not relate to CHA and they collect fees directly from the clients. These charges are charges collect fee , DO fee , Currency Adjustment Fee , Cartage revenue , etc. The appellants have clearly explained the natur....
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....e in favour of the appellants. The order of the Commissioner (Appeals) has not been challenged by the Revenue. In such circumstances, we agree with the learned Advocate for the appellants that the Revenue cannot agitate over the issue which has become final. The demand is also time-barred. In view of the above observation, we are of the view that the impugned order is not sustainable. Summing up, we find that the appellants had already discharged the duty liability in respect of the Customs House Agent activities undertaken by him. As regards all the other activities, we find that they do not relate to customs house agent activities. Even if any profit has been made in respect of those activities, they cannot be subjected to service tax in view of the Apex Court decision in the Baroda Electricity Meters Ltd. case (supra). In fine the demand is not sustainable. There is no justification for imposition of any penalty. We set aside the impugned order and allow the appeal with consequential relief." 5.6 The second issue is whether free booking of space in shipping liners would amount to BAS or not. The appellant in respect of demand under BAS. The appellant pre-books the slots even be....
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....of the procured space devolving on the appellant. By no stretch is this assumption of risk within the scope of agency function. Ergo, it is nothing but a principal-to-principal transaction and the freight charges are consideration for space procured from shipping line. Correspondingly, allotment of procured space to shippers at negotiated rates within the total consideration in a multi-modal transportation contract with a consignor is another distinct principal-to-principal transaction. We, therefore, find that freight is paid to the shipping line and freight is collected from client-shippers in two independent transactions. 13. The notional surplus earned thereby arises from purchase and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) of Finance Act, 1994 will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed." 5.7 Similar view has been expressed by the Tribunal in the case of DHL Lemuir Logistics Pvt Ltd. Vs CCE Thane - 2017 (47) STR 309 (Tr....