TaxTMI 
TaxTMI 
2024 (5) TMI 723
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....s/importers for transporting the goods through sea route. For this purpose they have taken certificate of registration with the jurisdictional Commissionerate for the purpose of payment of service tax under Section 69 of the Finance Act, 1994. During the course of verification of the records maintained by the appellants, ST-3 Returns etc. the Audit officers of the Department had found the appellants are not charging the exact amount billed by the shipping lines for transporting the goods, but are actually charging extra margin to the clients over and above the freight charges actually billed by the Shipping lines/Liner company. The Department interpreted that the amount charged by the shipping lines alone would constitute the exact amount of ocean freight; the charges mentioned in the invoice of the appellants towards freight to their clients with extra margin is not the ocean freight charges, and the difference amounted to 'service charges' for which the appellants are liable to pay service tax under the taxable category of 'Business Auxiliary Services' (BAS) in terms of Sections 65(19) and 65(105)(zzb) of the Finance Act, 1994. On completion of audit verification, the Department ....
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....as they service customers across various places whose goods have to be brought from their factory or place of storage to the seaport before its sent for export through ocean voyage. Thus, he claimed that levy of service tax is not applicable in their case and the confirmation of adjudged demands in the impugned order is improper. 3.2 Learned Advocate further stated that the present case of the appellants is covered in the order of the Tribunal in the case of EMU Lines Pvt. Ltd. Vs Commissioner of CGST & C.E., Belapur - (2023) 72 G.S.T.L. 373 (TRI.-MUM.) wherein it has been held that the freight element or any profit on such freight element cannot be subjected to tax under 'Business Auxiliary Services' (BAS). He further stated that the said order has been upheld by the Hon'ble Supreme Court, and thus the ratio of the said case is squarely applicable to their present case and the impugned order is liable to be set aside on the above basis. 3.3 Furthermore, learned Advocate also stated that the extended period of limitation cannot be invoked as the issue involved herein is of interpretation of legal provisions and there is no mention of any grounds in the SCN for such a demand u....
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....ate under sections 66/66B of Finance Act, 1994; c. failed to Determine the correct value of service tax payable under Section 67 of the Finance Act, 1994; d. failed to file true and correct half yearly returns by the due dates under Section 70 of the Finance Act, 1994; 15. Therefore, from the foregoing discussion and facts, it appears that the assessee deliberately and intentionally never shown the said income as taxable income the periodical ST-3 Returns. This act of assessee amounts to mis-declaration and suppression of facts with an intent to evade payment of service tax... 16. Now, therefore M/s Total Transport Systems Pvt. Ltd. situated at... are hereby required to show cause to the Commission of Service Tax- VII, Mumbai... as to why: (i) the aforesaid services provided by them, should not be classified under category 'Business Auxiliary Services' as per Section 65 (19) under the taxable under Section 65(105)(zzb) of the Finance Act, 1994 and Section 66B (erstwhile section 66) of the Finance Act, 1994 and they should not be held liable for payment of Service Tax at appropriate rate on their aforesaid activities, during the years 200....
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.... legal provisions contained in Chapter V of the Finance Act, 1994 as it existed during the disputed period in respect of the taxable service under dispute. "Definitions. Section 65. In this Chapter, unless the context otherwise requires,- (19) "business auxiliary service" means any service in relation to (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation.-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client; (v) production or processing of goods for, or on behalf of, the client; (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in subclauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of....
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....is-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall be equal to the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded:...." Classification of taxable services. Section 65A. (1) For the purposes of this Chapter, classification of taxable services shall be determined according to the terms of the subclauses of clause (105) of section 65. (2) When for any reason, a taxable service is, prima facie, classifiable under two or more sub-clauses of clause (105) of section 65, classification shall be effected as follows:- (a) the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description; (b) composite services consisting of a combination of different se....
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....ce receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service. Place of provision of services where provider and recipient are located in taxable territory. 8. Place of provision of a service, where the location of the provider of service as well as that of the recipient of service is in the taxable territory, shall be the location of the recipient of service. Place of provision of goods transportation services. 10. The place of provision of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of the goods: Provided that the place of provision of services of goods transportation agency shall be the location of the person liable to pay tax. Order of application of rules. 14. Notwithstanding anything stated in any rule, where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration." 8.2 From the plain reading of above legal provisions, for the period prior to 01....
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....er as Full Container Load (FCL) or Less-than full Container Load (LCL) to their customers as well as Bill of Lading for the ocean voyage or combined freight charge in case of Multi-modal transport document. The shipping lines are charging separately on the appellants for the cargo space/container space of the ship booked by them. Hence, we find the transaction of the appellants is on principal-toprincipal basis has been clearly brought out with supporting evidence. Further, it is also evident from these records that the appellants are neither agents of the shipping line nor they are promoting, marketing the services of the shipping line. In view of the above, we are of the considered view that the activities undertaken by the appellants in sale of cargo/container space as explained above does not get covered under the definition of Section 65(19) ibid as Business Auxiliary Services' (BAS). 9.1 Learned Advocate for the appellants had submitted that the adjudged demands cannot be sustained on the point of limitation, as the SCN has not made out any case for invocation of extended period. In this regard, we find that the SCN nowhere had given any specific ground for invoking the ex....
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....ust be alleged in the show-cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been practiced or that the assessee was guilty of wilful misstatement or suppression of fact. In the absence of any such averments in the show-cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11-A(1) of the Act.' It was held that the show cause notice must put the assessee to notice which of the various omissions or commissions stated in the proviso is committed to extend the period from six months to five years. That unless the assessee is put to notice the assessee would have no opportunity to meet the case of the Department. It was held : '...There is considerable force in th....
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....ransportation unless he is registered under this Act:... 2. Definitions.-In this Act, unless the context otherwise requires,- (j) "mode of transport" means carriage of goods by road, air, rail inland waterways or sea; (k) "multimodal transportation" means carriage of goods, by at least two different modes of transport under a multimodal transport contract, from the place of acceptance of the goods in India to a place of delivery of the goods outside India; (l) "multimodal transport contract" means a contract under which a multimodal transport operator undertakes to perform or procure the performance of multimodal transportation against payment of freight; (m) "multimodal transport operator" means any person who- (i) concludes a multimodal transport contract on his own behalf or through another person acting on his behalf; (ii) acts as principal, and not as an agent either of the consignor, or consignee or of the carrier participating in the multimodal transportation, and who assumes responsibility for the performance of the said contract; and (iii) is registered under sub-section (3) of section 4;" The above....
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.... of the goods' under Rule 10 ibid. Considering the above legal provisions, in the present case, we find that since the services are provided in respect of transportation of export goods, on the ocean voyage for delivery at the port of destination abroad, which is out of 'taxable territory', the services provided by the appellant cannot be covered under the service tax net, in the post negative list regime after 01.07.2012 also in terms of Section 66B ibid. 10.2 Further, the findings given in the impugned order for rejecting application of Rule 10 ibid is on the ground that Rule 8 shall apply in the present case, as both service provider and recipient of the service are located in the taxable territory. In this regard we find that, Rule 14 ibid specifically state thatnotwithstanding anything stated in any rule,where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration. Thus, we find that in terms of non-obstante clause which grants superimposing authority to Rule 14 ibid over the provisions of other rules, in terms of the rule tha....
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....d in India vide the Finance Act, 1994. It is legislated by the Parliament under the residuary entry, i.e. Entry 97 of List I of the Seventh Schedule of the Constitution of India. It is an indirect tax and is to be paid on all the services notified by the Union Government for the said purpose. The said tax is on the service and not the service provider.' and, though in the context of dispute relating to 'mandap keeper', the judgment is particularly relevant here as it goes on to observe after drawing attention to Section 68 and Section 65 of Finance Act, 1994 that. '12. A conjoint reading of the above provisions of the law goes to show that the services provided to a client, ... ... , falls under the category of taxable service' 9. The description of the taxable service in Section 65(105) of Finance Act, 1994 as well as the definition, if any, of the terms therein are the primary determinant for taxation of any service. From the observation of the Hon'ble High Court of Gujarat supra, it is clear that the provision of service is manifest by the existence of service provider performing an activity for which consideration is received from the recipient of the....
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....er and the carrier and the shipper is not privy to the minutiae of such contract for carriage. The appellant often, even in the absence of shippers, contract for space or slots in vessels in anticipation of demand and as a distinct business activity. Such a contract forecloses the allotment of such space by the shipping line or steamer agent with the risk of non-usage 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 n....
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....bsence of shippers, contract for space or slots in vessels in anticipation of demand and as a distinct business activity. It is a transaction between principal to principal and the freight charges or consideration for space procured from shipping lines. The surplus earned by the respondent arising out of purchase and sale of space and not by acting for client who has space or not on a vessel. It cannot be considered that the respondents are engaged in promoting or marketing the services of any "client". 12. In the present case it was recorded that the respondent was already paying service tax on commission received from airlines/shipping lines under business auxiliary service since 10-9- 2004. The original authority recorded that the show cause notice did not specify as to who is the client to whom the respondent is providing service. Original authority considered both the scenario, airline/shipping lines as a client or exporter/shipper as a client. In case the respondent is acting on behalf of airlines/shipping lines as client, it was held that they are covered by tax liability under BAS. Further, examining the issue the original authority viewed that commission amount is....
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.... In the case of Greenwich Meridian Logistics (I) Pvt. Ltd. [2016 (43) STR 215 (Tri.-Mumbai)/[2016] 69 taxmann.com 100 (Mum. - CESTAT)/[2016] 55 GST 635 (Mum. - CESTAT), the Tribunal has specifically observed as follows:- "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 it is a 'multi-modal transport operator' which entails a statutorily assigned role in cross-order logistics. According to section 2 of the Multimodal Transportation of Goods Act, 1993..... 12. The appellant takes responsibility for safety of goods and issues a document of title which is a multi-modal bill of lading and commits to delivery at the consignee's end. To ensure such safe delivery, appellant contracts with carriers, by land, sea or air, without diluting its contractual responsibility to the consignor. Such contracting does not involve a transaction between the shipper and th....