TaxTMI 
TaxTMI 
TaxTMI 
2024 (9) TMI 1828
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....vice tax. As per Section 65B(44) of the Finance Act, 1994 "service" means any activity carried out by a person for another for a consideration and includes a declared service. It appeared that the activity of the appellant is covered under Section 65B(49) as 'support services'. As per this Section, 'Support Services' means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis. Further, the said service is not a specified service under Negative List of Services of Section 66D of the Finance Act, 1944 and is also not an exempted service in terms of mega Notification No. 25/2015-ST dated 20.06.2012 effective from 01.07.2012. As per Rule 3 of the Place of Provision of Service Rules, 2012, the place of provision of a service shall be the location of the service recipient. 2.2 Section 67(3) of the Finance Act, 1994 provi....
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....ce etc. The Appellant is discharging service tax on the taxable revenue in accordance with the provisions of law. 3.2 The Appellant as a Freight Forwarder is engaged in providing transportation of goods by air / sea. Internationally freight forwarders are also considered as persons carrying out the activity of transportation of goods by air / sea. 3.3 As a freight forwarder, they purchase cargo space from the shipping line / steamer agent at a particular price and sell the same to the shipper / importer / exporter. 3.4 A freight forwarder issues a document of transport (airway bill / bill of lading / multimodal transport document) in their own name to the shipper and undertakes to perform all the duties of the carrier / liner. 3.5 The freight forwarder takes the responsibility for the delivery of goods and is virtually a carrier / liner to the shipper and acts as a shipper to the carrier / liner. Freight forwarders in the export segment are engaged in the transportation of goods from a taxable territory to a non-taxable territory on a principal-to-principal basis. Such services are covered by Rule 10 of the Place of Provision of service Rules 2012. For the period prior ....
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....ermediary. 3.11 The Appellant is challenging the OIA No. 361, 362 and 363 of 2017 dated 17.11.2017 (ST/40386 to 40388/2017) passed by the Commissioner (Appeals). The said order confirms the demand under clearing and forwarding agency services for the period prior 01.07.2012 and confirms the demand in terms of Section 65B(44) and Rule 3 of Place of Provision Rules. Appellant's contention: i. As a freight forwarder the Appellant negotiates with shipping line / airline for cargo space. The difference between the selling price and the purchase price is nothing but profit or loss as the case may be on air freight / ocean freight which cannot be subjected to service tax and the activity is that of the freight forwarder. ii. As per Rule 10 of Place of Provision of Service Rules in respect of transportation of goods other than by way of mail or courier the place of provision of service shall be the place of destination of goods. iii. With respect to export cargo since the destination of the goods is outside India it is not liable to service tax in terms of Rule 10 of Place of Provision of Service Rules. iv. The Education Guide issued by the dep....
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....s an intermediary is not tenable since the Adjudicating Authority has accepted the fact that the transaction between the Appellant and the liner is on a principal to principal basis (para 14.1). xiii. As per Section 2(f) of Place of Provision of Services Rules, 2012 `Intermediary' means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the "main" 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 account. xiv. A reading of the definition of intermediary indicates that the definition does not include a person who provides main service on his own account. The transaction between the Appellant and the liner is on principal-to-principal basis. xv. The finding of respondent that the activity merits classification under support service is made without appreciating the nature of business. When the exporter approaches, the Appellant books the cargo space and makes arrangement to send the cargo, issues House Bill of Lading. These activities are independent and not support servi....
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....in-Original No. 89&90/2016 dated 22.01.2016 was reiterated by the Ld. Authorised Representative. It is submitted that on perusal of the definition of 'support services', it can be seen that the services provided in relation to business or commerce includes every service provided in relation to business or commerce. The said definition is an inclusive definition and covers various activities. Even if the transaction is between principal to principal, or principal to agent, the definition would apply. From the facts, it can be seen that the appellant provides activities which are carried out in the ordinary course of operations and such services would fall under category of support services. The appellant has provided services to the exporters, importers, manufacturers, etc. These activities are done by any exporter or importer in the ordinary course of business. The appellant has supported the business of their clients and therefore the activity carried out by the appellant would fall under support services. The Show Cause Notice issued proposing to demand the markup collected by the appellant as freight charges is therefore a consideration received by the appellant from the....
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....be included in the taxable value, the appellant has to discharge the service tax on the markup collected by them as freight charges. The Ld. Authorised Representative prayed that the appeals may be dismissed. 5. Heard both sides. 6. The issue to be considered is whether the appellant is liable to pay service tax on the markup of the freight charges collected by them. The details of Show Cause Notice, Statement of Demand and period involved are given below: - Sl. No. Period Appeal No. 1 (a) July 2012 to March 2013 Show Cause Notice No. 10/2014 dated 2010.2014 (b) April 2013 to March 2014 SOD No. 75/2015 dated 20.05.2015 ST/40852-40853/2016 2 (a) 2011-2012-2013 Show Cause Notice No. 188/2014 dated 04.08.2014 (b) 2013-2014 Show Cause Notice No. 95/2015 dated 04.08.2015 (c) April 2014 to March 2015 Show Cause Notice No. 48/2016 dated 19.04.2016 ST/40386-40388/2018 Even though in the Show Cause Notices, it is alleged that the appellant is providing support services and therefore they are liable to pay service tax, in Statement of Demands it is alleged that the amount is in the nature of reimbursable expenses collected by the appellant. For be....
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....iary. The Original Authority has assumed that the appellant has acted an intermediary for the exporter / importer. It is pointed out by the Ld. Counsel appearing for the appellant that there was no such allegation in the Show Cause Notice that the appellant has acted as an intermediary. On perusal of the Show Cause Notice, it can be seen that the allegation was the appellant has collected markup on the freight charges and this is subject to levy of service tax under support services. Interestingly, the Department has raised the demand putting forward yet another allegation that the amount is in the nature of reimbursable expenses. The Show Cause Notice for the period 2014 to 2015, raises the allegation is that the amount collected by the appellant is in the nature of reimbursable expenses for providing transportation of goods and therefore is liable to pay service tax. When considering that the amount is reimbursable expenses for transporting the goods, it becomes ocean freight only and not a consideration received as intermediary. The allegations in the Show Cause Notices for the different period appears to be contradicting and inconsistent. 8. The very same issue as to whether....
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....21. The allegation in the SCN is that that amounts are received for managing, distributing and logistics. The appellant being a freight forwarder has discharged the service tax on the amount received for providing freight forwarding services. The amount accounted under 'net operating income' is now brought to levy of service tax under BSS. This amount is only excess of the freight charges. The differential freight earned by the appellant is not consideration for services rendered by them to their client. The issue as to whether the difference in the freight charges is a consideration for services and is liable to service tax was analysed in various decisions. In the case of Greenwich Meridian Logistics (I) Pvt. Ltd. Vs CST Mumbai - 2016 (43) STR 215 (Tri .- Bom), the very same issue came up for consideration and the Tribunal held that the notional amount earned by the assessee from purchase and sale of cargo space cannot be subject to levy of service tax. 22. In the case of CST New Delhi Vs Karam Freight Movers - 2017 (4) GSTL 215 (Tri.) it was held that demand of service tax on the income earned by the assessee is profit earned out of sale of cargo space and canno....
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....626/2019, the demand is on ocean freight for both export and import whereas in the case of appeal No. ST/40296/2018, the demand of Service Tax is on the air freight as well as mark-up received while paying the freight charges to the liners. The Ld. counsel submitted that the activity does not involve rendering of service and it is mere buying and selling of cargo space for the purpose of transport of goods by ocean / air on principal-to-principal basis. Ocean freight and air freight is not subject to levy of Service Tax. With effect from 2016, though freight charges for transportation of goods by way of air is subject to levy a Service Tax, the liability to pay Service Tax is on the air liners. The demand raised on the appellant is against the provisions of law. ........ ........ ........ 6.1 On perusal of the Annexure to the Show Cause Notice, it is seen that the demand is raised not only on the mark-up but also on the ocean freight and air freight. These charges are not subject to levy of Service Tax during the disputed period. The mark-up received by the appellant on the freight charges is due to the difference in the freight charges collected....
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....t of the appellant and cannot be called a service at all. Neither can the profit earned from such business be termed consideration for service. Respectfully 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. ....... ...... ....... 18. We find that the only allegation of these elements held against the appellant in the impugned order is that of 'suppression of facts' and the reason for this is that they have not disclosed the full value of the taxable services in their ST-3 returns. It is also accepted in the impugned order that these services were all duly recorded by the appellant. It is now well established legal principle that 'suppression of facts' is not mere omission. It must be a deliberate act with mens rea to suppress and thereby evade. The facts brought out in the impugned order do not demonstrate the mens rea. On the other hand, they show that the appellant had recorded all the transactions in its records and when called for during investigation, provided full facts to the department based on which the SCN was issued....