In M/s. Indo Lloyd Freight Systems Pvt. Ltd v. Commissioner of Service Tax, Chennai, the Chennai CESTAT held that the activity of arranging spaces with Shipping Liner is not subject to Service Tax.
The appellants, in the instant case, is engaged in the activity of arranging spaces with shipping liner and was receiving brokerage on the same from such shipping liners. The department demanded service tax for the above activity under the category of Steamer Agent Service along with interest and also proposing to impose penalty.
Before the Appellate Tribunal, the appellant held that the amount received cannot fall within the category of commission so as to be subjected to levy of service tax.
The bench observed that the agents of shipping lines normally book the export cargo. “The appellants actually get brokerage or commission for getting orders for the export of cargo. For this, they are getting commission of 1.75% to 2%. Even if this activity is considered as Business Auxiliary Services as they promote the taxable services of other person, it is seen that there is a Notification No. 13/2003 dated 20-6-2003 which gives exemption under Business Auxiliary Services for services rendered as commission agent.”
It was further noted that as per the Circular dated 25-4-2003, the secondary service providers are not taxable. “In fact the appellants are secondary service providers for the shipping lines, so they would not be covered in view of the Boards circular. Therefore, we are of the view that the brokerage commission of 2% paid for booking of export cargo cannot be taxed under the category of Business Auxiliary Services.”
Concluding the judgment in favour of the assesse, the CESTAT held that the activity of the appellant as a custom house agent is to provide services to importers/exporters and the disputed activity was only a facility arranged by them to their clients. “The appellant has no obligation to arrange transport of cargo through a particular shipping liner. Therefore, the amount received cannot fall within the category of commission so as to be subjected to levy of service tax. Following the decision in the case of Lee & Muir Head Pvt. Ltd. (supra), we hold that the demand is unsustainable.”
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