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2025 (11) TMI 1553
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....s in the form of freight, handling charges and various other charges. The appellants were undertaking the above services by shipment of both inbound and outbound consignment of cargo by air transportation, sea transportation, firstly negotiating with various airlines, shipping lines for purchase of bulk spaces on board the ship/ aircraft from the respective shipping lines, airlines in advance at a negotiated price, on a principal to principal basis, and later they were offering the services of freight space for inbound/outbound transportation to their customers. The appellants issue invoices to their customers for sale of space for cargo on ship/aircraft and also issue their own House Bill of Lading/Airway Bill. For the purpose of payment of service tax on taxable output services and for compliance with the Service Tax statute, they are registered with the jurisdictional Commissionerate under service tax registration No. AAACC2674HST004. 2.2 During the course of EA-2000 audit conducted on the records maintained by the appellants, the department had observed that in respect of aforesaid services provided by the appellants, they are collecting markup over and above the ocean freig....
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....ed by their customers, they issue House Bill of Lading/House Air Way Bill (HBL/ HAWB) to such individual customers. The HBL/ HAWB is document of title, which states that in case there is any deficiency in provision of ocean/air freight services, the appellants would be responsible for the same, as they provide the service of transportation of goods by sea/year to their customers on they provide one account. Therefore, these transactions are in the nature of a principal to principal basis, and the appellants are in no way connected with marketing or promoting of the business of shipping lines/airlines. Therefore, he stated that such services rendered by the appellants cannot be covered under BAS. In support of the same, he relied upon the decisions of the Tribunal in the case of Total Transport Systems Private Limited. Vs. Commissioner of CGST & Service Tax, Mumbai and EMU Lines Pvt. Ltd Vs. Commissioner of CGST & Service Tax, Belapur. Learned Advocate also referred to the clarification issued by Central Board of Excise and Customs (CBEC) in the educational guide, wherein it was clarified that the freight forwarder acting on his own account cannot be called as intermediary. Further,....
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....rned Advocate that the impugned order upholding confirmation of the adjudged demands cannot be sustained. 4. On the other hand, learned Special Counsel appearing for the Revenue reiterated the findings recorded in the impugned order. He further stated that the appellants have charged certain markup charges in addition to actual ocean/air freight charges collected by shipping lines/air lines, and these amounted to promotion or marketing of services rendered by such shipping lines/air lines, and thus the appellants are liable for payment of service tax on these charges. The appellants had accounted for the receipts from their overseas group companies as shared service income, but provided support services of business or commerce of their overseas shipping companies and thus the entire gross receipts shall be treated as consideration for providing such services. Hence, he stated that the appellants are liable to pay service tax on such charges. Furthermore, he stated that in respect of commission expenses, margin share on freight incurred by the appellants, being the service recipient in India, they are liable to pay service tax on reverse charge basis, as concluded in the impugned....
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....on 2 of the Central Excise Act, 1944 (1 of 1944); (c) "manufacture" has the meaning assigned to it in clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944). (104c) "support services of business or commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, 7[operational or administrative assistance in any manner], formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation.-For the purposes of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security; (105). "taxable service" means any service provided or to be provided,- xxx xxx xxx (zzb) to a client, b....
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.... Section 65A. Classification of taxable services. (1) For the purposes of this Chapter, classification of taxable services shall be determined according to the terms of the sub clauses 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 services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, insofar as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub clause which occurs first among the sub-clauses which equally merit consideration. Post Negative List regime(w.e.f. 01.07.2012): 65B(44) "service" means any activity carried out by a person for a....
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....ces 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. Rule 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." 8.1 On plain reading of above legal provisions, for the period prior to 01.07.2012, it transpires that in order to categorize a particular activity as a 'service' and to charge service tax thereon, it should be covered under the specific category of taxable services as per defined scope of coverage under tax net, inasmuch as each of the taxable services are defined separately under clause (105) of Section 65 of the Finance Act, 1994. The definition of taxable services under the category of 'Business Auxiliary Services' (BAS) covered specifically under the taxable clause (zzb) of Section 65(105) ibid include any service p....
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....e invoice for the sale of space either as Full Container Load (FCL) or Less-than full Container Load (LCL) or part/full Unit Load Device (ULD) to their customers as well as Bill of Lading for the ocean voyage or Air waybill for air transportation. The shipping/air lines are charging separately on the appellants for the cargo space/container/aircraft space of the ship/airlines booked by them. Hence, we find the transaction of the appellants is on principal-to principal 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/airline nor they are promoting, marketing the services of the shipping line/ airline. In view of the above, we are of the considered view that the activities undertaken by the appellants in sale of cargo/container space/ aircraft space as explained above does not get covered under the definition of Section 65(19) ibid as Business Auxiliary Services' (BAS) or under the definition of Section 65(104c) ibid as Business Support Services' (BSS), as the case may be. 8.4 We also find that Ministry of Finance, Central Board of Excise & Customs (CBEC) in....
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....arder is undertaking all the legal responsibility for the transportation of the goods and undertakes all the attendant risks, he is providing the service of transportation of goods, from a place in India to a place outside India. He is bearing all the risks and liability for transportation. In such cases they are not covered under the category of intermediary, which by definition excludes a person who provides a service on his account. 3.0 It follows therefore that a freight forwarder, when acting as a principal, will not be liable to pay service tax when the destination of the goods is from a place in India to a place outside India...." Plain reading of the CBIC circular, particularly the clarification at paragraph 3, along with the facts of the present case, establish that relationship in the contractual arrangement in providing the services by the appellants are on principal-to-principal basis and therefore would qualify for not being liable to pay service tax, as clarified therein. 9.1 We find that in the case of Total Transport Systems Limited (supra) arising from similar set of facts, this Bench of the Tribunal has held that demand of service tax on BAS i....
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....appellants is not specifically mentioned in the above definition. The documents placed on record, indicate that the appellants are issuing separate invoice for the sale of space either 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-to principal 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). 9.2 We further find that in the case of Greenwich Meridian Logistics (I) Pvt. Ltd. (supra), the Co-ordinate Ben....
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....t 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; and (a) "carrier" means a person who performs or undertakes to perform for a hire, the carriage or part thereof, of goods by road, rail, inland waterways, sea or air; 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 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 ....
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....r an agreement by no stretch of imagination be treated as common service provided among the two parties and there is no question of levy of service tax on such activity. The relevant paragraphs in the said judgement are extracted and given below: "15. We have considered the aforesaid submissions in the light of the material placed on record. We shall advert to the second aspect namely, as to whether the arrangement between GSFC and GACL amounts to providing any services by GSFC to GACL and 50% incineration expenses incurred would constitute charges for providing such services. There is no dispute about the manner in which HCN is received through pipeline from M/s. Reliance Industries Ltd. by GSFC and GACL and then shared in the ratio of 60 : 40 respectively. GSFC and GACL are public sector undertakings, as already mentioned above. Since HCN is to be received through pipeline, it is abundantly clear that in order to save the expenditure, both the parties agreed that there should be a common pipeline. Once HCN is received through the said common pipeline, it comes first to GSFC's premises and from there it is diverted in the ratio of 60 : 40, meaning thereby that GSFC receiv....