TaxTMI 
TaxTMI 
2023 (8) TMI 941
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....ellant collected charges from their customers as Ocean Freight both in the case of imports and exports. On verification of invoices, it was noticed that the amount collected as 'Ocean Freight charges' by the appellant from their customers is more than the ocean freight charges paid to the shipping companies. Though the appellant bills their customers with various charges viz. freight charges, LCL charges, Delivery Order charges, documentation charges, BL fees, Terminal Handling charges etc. service tax is discharged by the appellant on all charges except freight charges. Therefore, two Show Cause Notices dated 18.9.2015 for the period April 2010 to March 2015 and 16.4.2018 for the period from April 2015 to June 2017 were issued to the appellant proposing to recover the service tax of Rs.30,74,829/- and Rs.39,23,054/- respectively along with appropriate interest and imposing equal penalty. After due process of law, the respondent vide orders impugned has confirmed the demand of service tax of Rs. 69,97,883/- (Rs.30,74,829/- + Rs.39,23,054/-) along with appropriate interest and imposed penalties under section 78 of the Finance Act, 1994. 3. No cross-objections were filed by the re....
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....STL 559 (Tri. Chennai) c. Skylift Cargo Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai - Final Order No. 42242 to 42243 of 2017 d. La Freight Vs. CCE & ST Final Order No. 40464 to 40467 of 2018 Under the above said facts and circumstances, appellant prays that the Tribunal may set aside the Orders in Appeal on merits owing to covered judgments passed by this Tribunal in the interest of justice. 5. Shri Rudra Pratap Singh, learned Additional Commissioner (AR) appearing for the respondent-department has made many preliminary objections to the appeal filed by the appellant, as below. a) Although the appellant has introduced himself as Freight Forwarder they have not taken a registration under the said category but are registered under the Category of Business Auxiliary Services (BAS) and Business Support Services (BSS). b) The appellant has not submitted a copy of Annexure - I and Annexure - B of the First Show Cause Notice (SCN) No. 32 / 2015 dated 18.09.2015. Annexure - I contains the root cause of the current legal dispute between the appellant and the department. Annexure B claimed to contain sample of SCN's, which would help verify th....
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....loading of Goods. v. Warehousing. vi. Documentation, etc. vii. Customs Brokerage (Paying). viii. Supplying Cargo Insurance to Client. ix. Shipment Tracking. He further stated that although the appellant has relied on para No.2.1 and 2.2 of Circular No. 197/7/2016 dated 12.8.2016, from para 3.0 of the circular it is clear that when the freight forwarder acts in the capacity of principal then he will not be liable to pay service tax, but in present case, the appellant had been acting in the capacity of principal with respect to "Business Support Service (BSS)", for which they were duly registered. No facts have been shown by the appellant to prove that they had been acting as principal by prebooking the cargo space with the shipping lines / airlines, and then subsequently selling the same cargo space to "their would be customers / clients (i.e. the exporters / importers)". As per para 4.0 of the said circular, the field formations, were required to take a decision on the basis of four factors: (i) The Facts of the Case. (ii) The Terms of Contract between the Entities Concerned. (iii) The Provisions of the Fina....
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.... I) the booking of cargo space with Shipping Lines / Airlines by the appellant amounts to a sale which is excluded from the preview of service tax. II) The appellant is undertaking the activity of transporting of goods as freight forwarders. III) The appellant is providing Business Support Service on a principal-to-principal basis IV) The value to be adopted for purposes of computing duty. 8. We find that the impugned order at para 15.0 has examined the issue in detail as to whether the activity is in the nature of buying and selling of cargo space to get excluded from the purview of Service Tax. The same is reproduced below:- "15.0 Whether the activity is in the nature of buying and selling of cargo space and gets excluded from the purview of service tax (for the period both prior to and afterwards 1.7.2012). 15.1 This ground is advocated by the assessee to state that service tax cannot be levied on a transaction of sale. Then, the question that would require answer is whether the present transaction qualifies to be a sale. Section 4 of the Sale of Goods Act, 1930 defines "Sale and Agreement to sell'. Said Section 4 read....
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....hereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of transmitted, transferred, delivered, stored and possessed. If a software whether customized or non-customized satisfies these attributes, the same would be goods. Unlike the American Courts, Supreme Court of India have also not gone into the question of severability." While laying down the law as above, the Hon'ble Supreme Court considered when an intangible property like 'software' can be considered as goods and it was stated "24. In our view, the term "goods" as used in Article 366(12) of the Constitution of India and as defined under the said Act are very wide and include all types of movable properties, whether those properties be tangible or intangible. We are in complete agreement with the observations made by this Court in Associated Cement Companies Ltd. (supra). A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even inte....
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....ment of VAT/ sales taxes. Space is not capable of being transmitted, transferred, delivered and stored. We are handicapped in understanding whether there is even a limited transfer of title or right to use space in the vessel/ aircraft or its merely an agreement to carry the cargo/ container, due to a lack of a contract / agreement before us on this crucial aspect. Again, whether the space booked is a designated area of the cargo hold that is negotiated by the appellant or merely an agreement of carriage i.e. to carry on board the cargo/ container brought by the appellant to its destination, is not forth coming. The physical space remains with the Shipping Lines / Airlines. It is hence akin to rent, and is a service provided and not a sale. The trade nomenclature of 'buying and selling of cargo space' mentioned by the appellant does not, in this case, take away the substance of provision of the service. As held by the Apex Court in Commr. of Customs, Central Excise and Service Tax v. Northern Operating Systems (P) Ltd. [Civil Appeal No. 2289-2293 OF 2021/ 2022 SCC Online SC 658] the substance and not the form is material in determining the nature of transaction. 9. We now take u....
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.... that they negotiate the booking of space or slots in vessels in advance anticipating demand and that they are also into the transport of goods as distinct business activities. The invoices provided by the appellant and mentioned at para 5 above do not disclose the advance booking of space as a distinct business activity. Further they also agree that transportation of goods is not their distinct business activity and the same is outsourced. Their claim to being transporter of goods rests only on their claim that they act on a principle-to-principle basis while negotiating the booking of space from the Shipping Lines / Airlines. The appellant bills their customers with various charges viz. freight charges, LCL charges, Delivery Order charges, documentation charges, BL fees, Terminal Handling charges etc. which are for services pertaining to Business Support Service. Another important responsibility is undertaking all the legal responsibility for the transportation of the goods along with its attendant risks, while providing the service of transportation of goods, from a place in India to a place outside India. Generally, transportation of the goods are done based on 'adhesion contra....
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....ons of rule 9 of the POPS Rules 2012, should also be kept in mind wherein the place of provision of intermediary services is the location of the service provider. An intermediary has been defined, inter alia, in rule 2(f) of the POPS Rules 2012, as one who arranges or facilitates the provision of a service or a supply of goods between two or more persons, but does not include a person who provides the main service or supplies the goods on his own account. The contents of the succeeding paragraphs flow from the application of these two rules. 2.1 The freight forwarders may deal with the exporters as an agent of an airline/carrier/ocean liner, as one who merely acts as a sort of booking agent with no responsibility for the actual transportation. It must be noted that in such cases the freight forwarder bears no liability with respect to transportation and any legal proceedings will have to be instituted by the exporters, against the airline/carrier/ocean liner. The freight forwarder merely charges the rate prescribed by the airline/carrier/ocean liner and cannot vary it unless authorized by them. In such cases the freight forwarder may be considered to be an intermediary und....
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....cts in the capacity of a principal while booking space. His argument is that he is not a 'pure agent' as he charges a markup over and above the payment made for booking space with the shipping lines / airlines. They have to pay the shipping lines / airlines for the cargo space booked irrespective of a. Whether the space booked is sold or not b Whether they are sold at a profit or loss c Whether the appellant is able to recover the freight amount from the customer or not Hence, they are Freight Forwarders. It is a known fact in business that intermediaries providing support service try to earn a profit in an oligopolistic market, where business is dominated by few shipping lines/ airlines, the customer has imperfect knowledge about the routes, booking charges of cargo etc. Traders who look for ease of doing business approach any service provider in the trade who can make arrangements that will help ship his cargo and thereby assist his business activities. Entities who are not pure agents of shipping lines / airlines also provide support service to traders due to profits that can be made. They do so by getting an order from a customer, paying the bookin....
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....rative assistance in any manner, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. 7. In the instant case, it is on record that the appellant has carried out the activities in relation to export / import such as booking of containers, arrange for the transportation of export and import cargo of their customers, in containers, by sea / air through the shipping lines / airlines like M/s. NYK Line (India) Ltd., M/s. Maersk Line India Pvt. Ltd. Evergreen Shipping Lines Pvt. Ltd. etc. moving of goods to Harbour in case of export and moving out the goods after getting discharge certificate from the Customs / CFS in case of import etc. Thus the appellant manages the distribution and transportation of cargos to various destinations. All these activities are carried out by them on behalf of their customers and the same are carried out as on operational assistance in relation to business or commerce. These activities are therefore squarely covered by 'operational or administrative assistance in any manner' which is an inclusive part of the definition of Business Support Service. Accordingly, the respondent has co....
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....able thereupon. Any other amount which is calculated not for providing such taxable service cannot be a part of that valuation as that amount is not calculated for providing such 'taxable service'. Section 67 of the Finance Act 1994 was amended with effect from 14/05/2015 making reimbursable expenditure or cost as a part of valuation of taxable services for charging service tax. The period covered by the impugned order covers the period from 2010 to 2017 i.e. before and after the amendment to the section. Hence different treatment of reimbursable expenditure, if any, would be necessary during the two periods. The impugned order was passed before the Apex Court judgment supra brought finality to the matter and was not available for consideration by the learned Commissioner Appeals and before that by the Original Authority. We find that the issue is of importance and merits being examined afresh by the Original Authority based on facts, documentary evidence and the law as laid out by the Apex Court. To claim exclusion of any part of the consideration from the assessable value, prior to the amendment of section 67 ibid, the terms of agreement or understanding between parties should pr....
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....aid judgements. Each contract has to be understood in the terms set out therein. We find that the judgments are not based on common facts. Issue of classification in particular has not been questioned apparently nor is there any discussion as to the booking of cargo space from shipping lines / airlines where sales tax / VAT is discharged. They basically deal with the issue of what part of the consideration if at all received by the service provider from the service receiver as freight will form a part of the taxable value. Since we have found that the issue of valuation needs to be examined afresh by the Original Authority keeping in mind the change in section 67 and its implication for the different periods covered by the impugned order and the judgment of the Apex Court in Union of India v. M/s. Intercontinental Consultants and Technocrats (supra), we do not feel it proper to go into the legal issue at this stage. 10.3 The final issue pending examination in this case is whether extended period for issue of SCN is invokable or not. The appellant avers that the extended period has been invoked only on the ground that they did not declare the taxable value and assess tax correctl....