TaxTMI 
TaxTMI 
TaxTMI 
2023 (12) TMI 1288
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....in their Profit and Loss Account under the heading "Rebate on Airway Bill". No service tax was paid on these amounts collected. The discount is passed on to their clients and the same is reflected in the expenses side of their Balance sheet. No service tax was paid on this commission amount. (b) "Incentive from Sea" consists of Commission received for the clearance of sea shipments from other agents. No service tax was paid on this income. (c) "Due Agent Collected" consists of the Due Agent amount mentioned in Airway Bill. It consists of charges like CHA, Airport handling, loading, unloading, Terminal Charges payable to IAAI. Regarding these receipts, they stated that the service tax other than CHA charges was paid during the course of investigation. (d) "Agency Charges Collected" consists of Custom House Clearing Charges for which service tax had been charged and paid. (e) "Cargo Forwarding Income" consists of other charges like airport handling, custom house agency charges, import clearing charges, loading charges, transport charges, and other charges. 2. It appeared to the department from the above details that the appellant has not discharged service tax under Business....
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.... (v) The Appellant retains a portion of the discount and the rest is passed on to the customer, namely, the shipper. (vi) There is no finding in the impugned order with reference to the taxability on discount except for observing that any consideration for service by whatever nomenclature by which it is called is liable for tax. (vii) The airline with whom the cargo space is booked is not the client of the Appellant and therefore, the discount is not subject to service tax. The Appellant relies upon the following decisions where in it has been held that freight difference i.e., discount/incentive given by the airline/shipper line is not taxable: (a) Commissioner of Service Tax Vs AVR Cargo (2018) TIOL 2097 (b) Freight Systems India Pvt Ltd. Vs Commissioner of GST & Central Excise (2018) TIOL 3395 (c) Commissioner of Service Tax Vs Karam Freight Movers (2017) 4 GSTL 215 (d) Sindhu Cargo Services Ltd. Vs Commissioner of Service Tax (2019) 24 GSTL 664 (e) Commissioner of Service Tax Vs Continental Carriers (2017) TIOL 3964 (f) Greenwich Meridian Logistics (I) Pvt Ltd. Vs Commissioner of Service Tax, Mumbai (2016) 43 STR 215 (g) DHL Lemur Logistics Pvt Ltd. Vs Commiss....
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.... they have to discharge service tax. However, the amounts were properly accounted and not suppressed. The SCN issued invoking the extended period therefore, may be set aside. 4. The Learned AR Shri Sathya Narayanan appeared and argued for the department and supported the findings in the impugned order. 5. Heard both sides. 6. The demand of service tax is made under Business Auxiliary Services, Custom House Agency Services and Goods Transport Agency Services. 6.1 It is not disputed that the appellant who is an IATA agent has discharged service tax on the agency commission received by them. The SCN does not raise demand on the agency commission received by the appellant. It is seen that the demand for service tax under Business Auxiliary Services is raised on the discounts/incentives received from Airlines and Shipping lines. In para 5.1.2 of the order, the adjudicating authority has observed as under: "In the instant case, the assessee realized various amounts under the heads viz, income from airlines, incentive from airlines, income from sea, incentive from sea, due agent collected, etc, and the same are received by the assessee for promotion and marketing of air cargo transp....
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....ed these allegations by submitting that the appellant does not do any activity of promotion or marketing of the airlines or the shipping lines. These airlines or shipping lines are not client of the appellant. 6.4 On appreciation of facts, it can be seen that the appellant books the cargo space on various airlines/shipping lines and pay freight for the same. The appellant collects the freight from the shippers for the space and transportation of the cargo. In some occasions, the total amount paid to the airline/shipping line may be less than the amount the appellant, receives as freight charges from their client (importer/exporter). The appellant thus receives a markup. In some cases, when the appellant is unable to sell the total space or the freight charges collected from the client is less, appellant may incur loss. It is thus trading of cargo space, where there may be profit or loss to appellant. The airline/shipping line can never be considered as a client of the appellant as under Clause (ii) of Section 65(19). The client of the appellant is the importer/exporter or shipper. Thus it can be seen that the appellant does not render any activity of promoting or marketing the tra....
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....both sides and perused the records. For a service tax to be leviable: (a) a service must have been rendered; (b) the service so rendered must be a taxable service within the meaning of Section 65(105) of Chapter V of the Finance Act, 1994; and (c) a consideration must have been paid for that service; 8. If a service is not rendered at all, no service tax can be levied regardless of the fact that an amount has been received. Similarly, if the service so rendered does not squarely fall within the definition of 'taxable service' under Section 65(105), no service tax can be levied. Even if it is doubtful whether the service is taxable or not, the benefit of doubt in respect of the charging section goes in favour of the assessee and against the revenue. The third important element is the consideration for the service. Any amount received must be for the service and it cannot be for some other purpose. For instance, if any amount is received towards any compensation, such amount cannot be taxed. 9. As far as the differential in ocean freight is concerned, the appellant buys space on ships from the Shipping Line and the Shipping Line issues a Master Bill of Lading in favour....
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.... case of Greenwich Meridian Logistics (I) Pvt. Ltd. versus Commr. Of S.T., Mumbai 2016 analysed the issue in detail. It is re-produced as under:- 10. The original authority has proceeded on the assumption that there is only one payment and, that too, for freight charged by the shipping line. He has rejected the possibility of trading in space or slots on vessels by holding that trading in space or slots is a figment and freight is all that is transacted. This is a patent misconstruing of the usage of that expression. Freight, though used colloquially to describe all manner of carriage, is the nomenclature assigned to the consideration for space provided on a vessel for a particular voyage. Freight is charged by the entity that is in possession of space on a vessel from an entity that requires the space for carriage of cargo. 11. Slots may be contracted for by the shipper or its agent with the shipping line through the steamer agent. Implicit is a uni-directional flow of consideration because the space belongs to the shipping line. Steamer agent or agent of shipper may earn commission in such a transaction. Leaving that situation aside, the contention of the appellant is that ....
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....94 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. 14. We, therefore find no justification for sustaining of the demand and, accordingly, set aside the impugned order. Demands, with interest thereon, and penalties in both orders are set aside. Crossobjections filed by the department are also disposed of. 7. Following the same, we are of the view that the demand cannot sustain and requires to be set aside which we hereby do. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any." 6.6 In the case of Direct Logistics Private Limited Vs CST Bangalore 2021 (55) GSTL (Tri - Bangalore (1.0.2021) the department was of the view that the amount collected by the assessee from client (shipper) over and above the ocean freight paid to the shipping line is to be included in the taxable value for payment of service tax under 'Clearing and Forwarding Agent Service'. The Tribunal answered the question in favour of the assessee. The relevant paras read as be....
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....r customers for Ocean Freight and the amounts actually paid to the shipping lines is in the nature of profit earned from their business of selling cargo space on the ships. Elaborating on the arrangements, the Learned Counsel explains that at times they book cargo space on the ship as per the customers' specific orders. At other times, they book the cargo space in bulk on the ship in anticipation of the customers' requirement. Their contract with the shipping line is on principal-to-principal basis. Once they book the cargo space on a ship, they are bound to pay the shipping line for the entire cargo space whether or not they are able to get sufficient customers to utilize the entire space booked by them. On the other hand, their relationship with the customers is also on principal-to-principal basis and they assure the customers of transport of their cargo on the ship. They charge their clients at one rate and pay the shipping line at a different rate and the difference is their business profit from trading in the cargo space on the ships. At times, if there are not adequate customers to take up the entire space booked by them on the ship, they may have to lower the rates to attra....
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....tfully following Satkar Logistics, Nilja Shipping Pvt. Ltd., Surya Shipping and ITC Freight Services, we hold that the appellant is not liable to pay service tax." 26. Similarly, in the case of Seamax Logistics Ltd. v. Commissioner of Central Excise and Service Tax, Tirunelveli, reported in 2018 (7) TMI 262 has held that no service tax is chargeable on the difference between the ocean freight collected from the clients and the ocean freight paid to the shipping lines." 6.8 In the case of CST, New Delhi Vs Karam Freight Movers 2017(4) GSTL 215 (Tri - Del) the very same issue of liability to pay service tax on the brokerage from various airlines, shipping lines, freight forwarding companies for cargo related services was examined. It was held that mere sale and purchase of cargo space and earning profit in the process is not taxable activity. It was held that the mark up value was of freight charges and not commission for rendering services. The relevant para reads as under: "11. On the second issue regarding the service tax liability of the respondent under BAS, we find that the impugned order examined the issue in detail. It was recorded that the income earned by the respond....
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....r and said mark-up value is of freight charges and are not to be considered as commission. Based on these findings the demand was dropped. We do not find any impropriety in the said finding. The grounds of appeal did not bring any contrary evidence to change such findings. Accordingly, we find no merit in the appeal by Revenue. The appeal is dismissed." 6.9 Though the department filed appeal before the Hon'ble Apex Court against the judgement passed by Tribunal in the case of Greenwich Meridian Logistics (I) Pvt Ltd., the same was dismissed on 1.4.2019 on the grounds of delay, as reported in 2019-TIOL-150-SC-ST. 6.10 The Learned Counsel has also submitted that the Mumbai Bench of the Tribunal in the case of Emu Line Pvt Ltd. Vs Commissioner (2023) 4 Centax 122 (Tri-Mum) held that the demand of service tax on the incentives received by assessee from shipping line, under Business Auxiliary Service (BAS) alleging that assessee was promoting or marketing the business of shipping lines is not sustainable. This decision was affirmed by the Hon'ble Apex Court in Commissioner CGST & CE, Belapur Vs Emu Line Pvt Ltd (2023) 4 Centax 129 (S.C) 6.11 The Learned Counsel for appellant has fai....
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....issue is the demand under CHA services. It is not disputed that the appellant has discharged the service tax on agency commission received for CHA services. The demand is raised on the various expenses incurred and reimbursed by client. In para 5.3 to 5.4.2 of the impugned order, the original authority discusses that the appellant has to include the various expenses incurred by them and reimbursed by client in the taxable value. The issue as to whether reimbursable expenses are to be included in the taxable value is settled by the decision of the Hon'ble Apex Court in the case of UOI Vs Intercontinental Consultants and Technocrats Private Ltd 2018 (10) GSTL 401. After appreciating the facts and following the decision of the Hon'ble Apex Court, we are of the view that this demand raised under CHA services, cannot sustain and requires to be set aside. Ordered accordingly. 8. The third issue is with regard to non-payment of service tax under GTA services. The Learned counsel submitted that the appellant is not contesting this issue in this appeal. The demand and interest on GTA services is upheld. 9. The Learned Counsel has argued on the grounds of limitation also. It is seen that t....
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...., and indeed Mr. Sundar has repeatedly emphasized, that there is an alternate statutory remedy available in respect of the impugned order and as such there is no warrant for the interference of this Court in extraordinary jurisdiction under Article 226 of the Constitution of India. However, all relevant facts are on record. Both Learned Counsel concur on the position that the agreements that provide for the landmarks or stages of completion of work by the petitioner and consequential payments by the customers, is available with the Department. ...... 34. In the light of the discussion above, the impugned order of assessment dated 21-4-2017 is set aside and the matter remitted to the file of the respondent to be re-done de novo strictly in accordance with the provisions of Rule 3 of the Rules and in the light of the observations made in this order after affording due opportunity to the petitioner, within a period of three (3) months from date of receipt of this order." 10. In the present case, the appellant has accounted all amounts received by them in their financial statements. In such scenario, it cannot be said that the appellant has suppressed facts with intent to evade....
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....eevi C.S. The impugned order of the lower authority covers issue pertaining to three services as below. 1) Service tax payable on Business Auxiliary Service (BAS) 2) Service tax payable on Custom House Agent Service (CHA) 3) Service tax payable on Transport of Goods by road service (GTA) Two of the above services (i.e BAS and GTA) were, as alleged in the SCN, not declared earlier by the Appellant. The appellant had acquiescence to the classification of the non-declared services with a few reservations expressed on valuation before the original authority. They have now raised a host of legal issues that require a deeper examination in conjunction with the facts of the case. I would hence like to examine the facts and law independently before I arrive at a conclusion on the issues raised in the appeal. Hence, this order. 14. In the discussions below, 'liner' refers to both the 'airlines / shipping lines' and 'consignor' refers to the EXIM trade customers who want to book their cargo on a liner. Any agreement that is enforceable by law is a contract, hence the words 'agreement' and 'contract' are being used interchangeably below. 15. The dispute emanates from an investigation....
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....y returns / documents. The appellant has not been able to explain with proper evidence the nature and substance of the sale, discount and commission allowed to them so as to examine the true nature of these activities. In fact in their reply to the SCN they had reworked out the duty payable towards the three services mentioned in the SCN and agreed to pay the balance duty as per their calculations. The Apex Court in Commissioner of Income Tax v. Best & Co. (Pvt.) Ltd. [AIR 1966 S.C. 1325] stated as under: "We may point out, as some argument was advanced on the question of burden of proof, that this Court did not lay down that the burden to establish that an income was taxable was on the Revenue was immutable in the sense that it never shifted to the assessee. The expression "in the first instance" clearly indicates that it did not say so. When sufficient evidence, either direct or circumstantial, in respect of its contention was disclosed by the Revenue, adverse inference could be drawn against the assessee if he failed to put before the Department material which was in his exclusive possession. The process is described in the law of evidence as shifting of the onus in the course....
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....d [2011 (23) S.T.R. 66 (Tri. - Del.)] which is germane to this issue, a Cordinate Bench of this Tribunal at Delhi held as under: "9. We do agree with the ld. Appellate Authority in the matter of the discrepancy noticed by him in respect of the considerations received and appearing in different manner in two different statutory documents. While the ST 3 return was statutory document under Finance Act, 1994, the balance-sheet and profit and loss account were statutory documents under Companies Act, 1956. Therefore, when the public documents bring the discrepancy, the onus of proof was on the assessee to come out with clean hand to prove its stand." (emphasis added) 19. Having examined the Appellants preliminary objections and found them to be invalid, I now examine the merits of their submissions regarding the services rendered. I take up BAS first. Business Auxiliary Service (BAS) 20. The demand pertains to the period 2004-05 to 2008-09. The appellant in their reply to the show cause notice dated 09/07/2010 have described their activity relating to their business transaction as under (no para or page numbers have been given in their reply letter): "We have contested the de....
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....s, it is hereby declared that for the purpose of this sub-clause, service in relation to promotion or marketing of service provided by the client includes any service provided in relation to promotion or marketing of games of chance, organized, conducted or promoted by the client in whatever form or by whatever name called whether or not conducted on line including lottery, lotto, bingo. ***** ***** ***** (vii) a service incidental or auxiliary to any activity specified to subclauses (i) to (vi) such as billing, issue or collection of recovery of cheques payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision and includes services as a commission agent, but does not include any activity that amounts to 'manufacture' within the meaning of clause (f) of section 2 of the Central Excise Act, 1944. Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause - (a) 'commission agent' means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for ....
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....e Income Tax Act, 1961. The said section requires deduction of TDS at 10% plus surcharge from payments falling under the definition of "Commission" or "Brokerage". The issue arose because within the aviation industry during the relevant period, the base fare for air tickets was set by the International Air Transport Association ("IATA") with discretion provided to airlines to sell their tickets for a net fare lower than the Base Fare, but not higher. Within this framework, the airlines would have no control over the Actual Fare at which the travel agents would sell the tickets. While the ceiling price could not be breached, the agents would be at liberty to set a price lower than the Base Fare pegged by IATA, but still higher than the Net Fare demanded by the airline itself. Hence, the additional amount that the travel agents charged over and above the Net Fare that was quoted by the airline would be retained by the agent as its own income. This auxiliary amount charged on top of the Net Fare was portrayed on the BSP as a "Supplementary Commission" in the hands of the travel agent. The stand taken by the assessees was that the "Supplementary Commission", was income earned via proce....
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....arges with the consignor could have the colour of a 'brokerage' or 'commission' which will be clear only when the terms of engagement between the parties is known. Moreover Section 194H (ibid) referred to "service rendered" as the guiding principle for determining whether a payment fell within the ambit of a "Commission", and the Hon'ble Court concluded that the classification of the difference between the 'Actual Fare' and 'Net Fare' as being a "Commission". Further the judgment has cited with approval the Hon'ble Court's judgment in Khedut Sahakari Ginning and Pressing Society v. State of Gujarat [(1971) 3 SCC 480 ] and has placed emphasis on the need to closely scrutinize the contract between the parties. The judgment opined that: "5. Whether a particular agreement is an agency agreement or an agreement of sale depends upon the terms of the agreement. For deciding that question, the terms of the agreement have got to be examined. The true nature of a transaction evidenced by a written agreement has to be ascertained from the covenants and not merely from what the parties choose to call it. The terms of the agreement must be carefully scrutinised in the light of the surrounding....
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.... service from a contract for service will serve any useful purpose. The most that profitably can be done is to examine all the factors that have been referred to in the cases on the topic. Clearly, not all of these factors would be relevant in all these cases or have the same weight in all cases. It is equally clear that no magic formula can be propounded, which factors should in any case be treated as determining ones. The plain fact is that in a large number of cases, the Court can only perform a balancing operation weighing up the factors which point in one direction and balancing them against those pointing in the opposite direction [ See Atiyah, PS. "Vicarious Liability in the Law of Torts", pp. 37-38]." 27. I have examined the judgments provided by the Appellant and listed at para 3 above, to support their stand. I, however, was unable to find any test employed in the judgements to determine the relationships between the appellants and the liners in the said cases, to help guide me. The decisions appear to be ipse dixit, (Latin term that can be roughly translated to mean "he himself said it."). In a legal context, it refers to decisions made on an assertion or statement made....
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....o so in his own capacity. The crucial test of the status of an agent is that his acts binds the principal. As stated by the Hon'ble High Court of Gujarat in Varsha Engg Pvt Ltd v. Vijaya Traders, [AIR 1983 Guj 166], the essential feature of an agent is his power of making the principal answerable to third persons and enabling the principal to sue third parties directly or render him liable to be sued directly by the third party. In the circumstances a test of whether the Appellants transactions with the liners, as claimed, are on principal-toprincipal basis and that with the consignors on a principal-to-client basis, is proposed as under. I. Whether there was a bulk booking of space onboard the liners, by the Appellant, in advance i.e. before negotiating the booking of cargo on board the vessel with the consignors, or was the booking done on a case-to-case basis after receiving an order from the consignor. The dates of the Master Bill of Lading issued by the Shipping line in the Appellants name and in turn, the date on which the Appellant issues co-related House Bills of Lading to its customers / consignors should be a pointer. II. Whether the liner's invoice to the Appellant p....
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....o was a secondary service and hence no tax was leviable. This view was not pleaded before us and the facts were not stated nor examined with the relevant provisions of the Act and Rules. As regards 'agency charges' and 'due agent collected' they stated that these were paid as handling charges and other charges at the air / sea port and later collected from their clients which is not their income and was not liable to discharge service tax. They have accordingly as per their own tabulation accepted to pay service tax on BAS and CHA services of Rs 34,99,952, and on GTA services of Rs 1,83,646. The total service tax payable on BAS+CHA+GTA was worked out to be Rs 80,39,813/- against Rs 1,74,27,945/- alleged in the SCN. Having made certain payments during the investigation they accepted to pay the balance of Rs 31,34,876, shortly and produce the challans. They prayed that based on their submissions the SCN may be dropped. Although there has been some acceptance of the allegations made in the SCN, I feel that in the light of the peculiar facts and issues raised in the appeal the factual position needs to be re-examined afresh. Sale of space and Sales Tax 30. Before concluding the disc....
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....y be one of the elements of the transaction; (iv) the effective or general control does not mean always physical control and, even if the manner, method, modalities and the time of the use of goods is decided by the lessee or the customer, it would be under the effective or general control over the goods; (v) the approvals, concessions, licences and permits in relation to goods would also be available to the user of goods, even if such licences or permits are in the name of owner (transferor) of the goods; and (vi) during the period of contract exclusive right to use goods along with permits, licenses, etc., vests in the lessee. I find that the Department of Revenue's Circular, D.O.F. No.334/1/2008-TRU, dated 29 February, 2008, which stated that, whether a transaction involves 'transfer of possession and control' is a question of fact and is to be decided based on the terms of the contract and other material facts and that this could be ascertainable from the fact whether or not VAT is payable or paid, was noticed and emphasis supplied by the Apex Court in para 18 of its judgment in Commissioner of Service Tax, Ahmedabad Vs. M/s. Adani Gas Ltd. [Civil Appeal No. 2633 of 2020....
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....these were consideration towards rendering the taxable service irrespective of the nomenclature. The appellant has stated that there is no finding in the impugned order with respect to the taxability of discounts. The airlines with whom the cargo space is booked is not their client, theirs is a principal-to-principal transaction, and therefore the discount is not subject to service tax. I have discussed the issue pertaining to the appellants claim for a principal-to-principal relationship with the liners above. It has to be stated at the risk of repetition that the expressions 'principal' and 'agent' used in a document are not decisive. Representative questions were formulated above to verify the nature and substance of the relationship. Further as stated above facts like the nature of the discount, whether there are any additional obligations on the part of the appellant to the liners, whether the discount was in any way tied to a reciprocal activity etc. are all very relevant in determining the eligibility of Discount / Commission / Brokerage. These issues needed to have been taken up with the Original Authority. Not having done so this Tribunal cannot fill in the....
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....ugned order is from 2010 to 2015. The Show Cause Notice is dated 9.10.2015. Therefore, the maximum period up to which the demand can be imposed is only till October 2013 and the demand from 2010 to October 2013 merits to be set aside. There was never a suppression of facts to the department. Audit has been conducting periodical verification of accounts during the alleged period. They have been filing ST-3 returns and TR6 forms regularly in which they have disclosed all requisite information. I find from the impugned order that in this era of self-assessment the Appellant filed ST 3 returns for CHA service from April 2004 to September 2006 only and have had not filed ST3 Returns for the impugned services for the period October 2006 to March 2009 and did not pay service tax thereon. The Hon'ble Madras High Court in its judgment in K. Nirai Mathi Azhagan Vs Union of India [Writ Petition No.18314 of 2018 / decided on 03/1/2020], at para 9 has stated as under: "The department is correct in contending that the acts of an assessee in discharging his entire tax liability to the Government by way of Advance Tax, TDS, self-assessment, etc., is set at naught if the same is not intimated to ....
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....ing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by superior Courts. h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice. i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. l. Reasons in support of decisions must be cogent, cle....