TaxTMI 
TaxTMI 
2026 (7) TMI 155
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.... from the respective shipping lines in advance; then the appellant offers the space thus purchased at a marked-up price to exporters; the Appellant takes responsibility for booking cargo space, coordinating logistics, ensuring loading of cargo on the scheduled vessel and ensuring delivery within the agreed timelines. 2. 1.the Appellant was registered with the Service Tax department and was regularly filing returns. During audit of the Appellant's records for the period September 2008 to September 2013, it was observed that the Appellant had discharged service tax on Business Support Services provided in relation to facilitation of export/import cargo and on Business Auxiliary Services towards commission received from shipping lines. However, Revenue observed that certain differences were noticed between the ST-3 returns and balance sheets in respect of income under the heads "Freight Inwards", "Freight Inwards (Service Tax)", "Commission Received (Service Tax)" and "Rent Received"; it is not disputed that the Appellant had duly discharged service tax liability on 3 out of the aforesaid 4 income heads, namely, "Commission Received", "Rent Received" and "Freight Inwards (Service T....
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....alleged that the markup charged by the Appellant constituted consideration for providing composite support services to exporters, allegedly including door-step pickup, local transportation from factory to ICD/CFS, cargo handling, labour and other facilitation activities in relation to export business; the said allegation is entirely baseless and without any supporting evidence; the markup earned by the Appellant represented nothing but its business margin/profit arising from purchase and resale of cargo space/ocean freight on principal-to-principal basis; mere markup on resale of ocean freight cannot convert the transaction into a taxable service. He submits that the Appellant was operating as a freight forwarder on a principal-to-principal basis; the invoices raised by the shipping lines upon the Appellant and the corresponding invoices raised by the Appellant upon its customers with a markup clearly establish that the Appellant was providing the service as a principal and not as an agent/intermediary of the shipping lines; had the Appellant acted merely as an agent, the shipping lines would have directly invoiced the exporters, and the Appellant would have earned only agency comm....
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....ination of goods is outside India; "Taxation of Services: An Education Guide" also clarifies, under Para 5.9.6, that where a freight forwarder, under a single contract and for a consolidated consideration, provides domestic transportation along with international freight services on principal to-principal basis, such bundled service is to be treated as transportation of goods; since the destination of goods is outside the taxable territory, the service is not liable to Service Tax; the Guide further clarifies that ancillary services such as loading, unloading and handling, when naturally bundled with transportation, assume the character of the principal service. 6.1. Learned Counsel submits that the impugned activity cannot be termed as 'BSS" as per Board's circular DOF No. 334/4/2006-TRN dated 28.2.2006 wherein clarification was issued in respect of Business Support Services; the circular clearly indicates the intention of the Government to bring various outsourced services within the ambit of levy of service tax; the Shipper/Exporter (i.e., the client) is not engaged in transportation service and therefore it cannot be said that such transportation services have been outsource....
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....by Shri G.D., Bansal, learned authorized Representative supports the impugned order. 9. Heard both sides and perused the records of the case. The appellant is providing services to exporters in the course of export of goods. On conduct of an audit and on comparing the income received on various counts as reflected in balance Sheets and the value of taxable service reflected in ST-3 returns, it appeared to Revenue that the appellant has not discharged service tax on income shown under the head 'freight inwards'. The appellant submits that the amount thus reflected in financial records pertains to income earned in buying and selling space in the air crafts/vessels; it is a pure business income and no service is involved. Revenue is of the opinion that since there is a margin in selling and buying it constitutes a service. We find that that the impugned order finds that : 4.6 It is thus seen that the noticee has collected excess charges than the amount paid for the purchase of the services under the heading of ocean freight. For providing the services of door-step pick-up of export consignment and its subsequent delivery to port of export for transport by the ship/airline,....
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.... order proceeds to assume that the appellant is not a pure agent between the shipper and exporter and the difference is due to the provision of other services like local transportation from the client's factory to ICD/CFS, cargo handling, labour and other facilitation to support the business of the exporter. We find that the above conclusion has no merit because of the following reasons. (i). Firstly, it defies the basic logic/principle of business that profit is the motive in buying and selling. (ii). Secondly, it assumes that the mark up is due the reason that the appellant is rendering services like local transportation from the client's factory to ICD/CFS, cargo handling, labour and other facilitation to support the business of the exporter without any reason or evidence. (iii). The authority takes multiple stands sometimes contradictory to each other vis a vis the status of the appellant in the transaction saying on one hand that the appellant is not a pure agent as there is a markup involved in buying and selling of space by the appellant and on the other hand that the markup is due to other services rendered by the appellant. (iv).....
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....the appellant herein is purchasing the space from the shipping lines and then is selling the same to exporters. It is the case of the Revenue that this amounts to acting as an intermediary for helping the business of the shipping lines and therefore they are liable to pay service tax on business auxiliary services on the profit which they receive. It is the case of the appellant that this is a deal on principal-to-principal basis between them and the shipping lines and again between the exporters and them. They are not acting as an agent. They could purchase the space for a lower price and sell it at a higher price and thereby earn profit. On the other hand, if they failed to sell the space to exporters, after purchasing from the shipping lines, they may incur a loss. They are not receiving any commission whatsoever from the shipping line or from the exporters. We have considered the Circular of the C.B.E. & C. cited by the Learned Departmental Representative at Para 2.1-3 which are as follows: "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 t....
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.... held that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions is not leviable to service tax. We find no reason to deviate from this view taken by the Tribunal which view is also supported by the C.B.E. & C. circular cited above. In conclusion, the demand of service tax, interest and penalties are liable to be set aside and we do so." 12. We further find that the Allahabad Bench of the tribunal held similarly in the case of M/s Blue Moon Logistics (P) Ltd 2024 (3) TMI 285 - CESTAT Allahabad held similarly. Hon'ble supreme Court has upheld the order and as such the issue has attained finality. The Bench held that : In addition to the above submissions, it is submitted that the activity of trading space is not notified by the Government as a 'service' under Section 65(105) of the Finance Act, 1994. As regards, the transportation of goods by air service provided by the airlines from one country to another country or within the country were made taxable under Section 65(105)(zzn) of the Finance Act, 1994 w.e.f. 10.9.2004. However, the Appellant assessee is not an aircraft operator and as....
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.... 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 it is a "multimodal transport operator' which entails a statutorily assigned role in cross-border logistics. According to Section 2 of the Multi-modal Transportation of Goods Act, 1993. (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; And (a) "carrier" means a person who performs or undertakes to perform for a hire, the carriage or p....