Activities of a Sub-Contracting CHA are not Subject to Levy of Service Tax: CESTAT [Read Order]

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the activities of a sub-contracting Customs House Agent(CHA) are not subject to the levy of service tax. The Ground on limitation is not applicable in the absence of suppression of fact by the assessee.

M/s. International Clearing & Shipping Agency, the appellant is a partnership firm and holds the certificate of registration from the Service Tax Commissionerate under CHA Services and Steamer Agency Services.  They were filling returns and also discharging Service Tax under these heads.  The officers of the internal audit attached to the Chennai Commission verified the accounts of the appellant. 

On scrutiny of the profit and loss account submitted for the financial years from 1997-2004, it revealed that the appellant has not discharged Service Tax on (i) operational surplus, (ii) service charges/tax exempted and (iii) freight and brokerage. 

A Show Cause Notice was issued proposing to demand the Service Tax on the above amounts alleging that these are like considerations received for CHA services as well as Steamer agent services.  Separate Show Cause Notices for the same period were issued regarding CHA services / Steamer agency services.  After due process of law, the original authority confirmed the demand, and interest and imposed penalties.

 The Counsel Ms. Radhika Chandrasekar appeared and argued for the appellant. It was submitted that the Department alleged that the appellant has not paid Service Tax on Operational surplus, Service charges / Tax exempted, Freight and Brokerage, etc.

The appellant has collected various charges like expenses incurred by them for payment of statutory levies, pilotage and berth hire charges, Indian Coast light dues paid to the port authorities, cargo expenses paid to the port authorities, charges paid to transporters such as CONCOR/Railways/Private Transporters, Chartered Accountants Fee, Income Tax deductions, Brokerage paid to Export cargo, etc.

On perusal of the Show Cause Notice, it is seen that based on the financial statements, the Department has raised the demand on three heads viz., (i) operational surplus, (ii) service charges/tax exempted and (iii) freight and brokerage. 

The counsel for the appellant has argued on the ground of limitation also.  Apart from a vague allegation in the Show Cause Notice that the appellant has suppressed facts with intent to evade payment of Service Tax, there is no positive act of suppression established against the appellant.  Moreover, the entire figures which have been the basis for raising the demand as per these Show Cause Notices have been collected from the financial statements of the appellant.  

It was evident that the appellant had properly accounted for all the transactions and amounts collected by them.  They have discharged the Service Tax on the agency commission received as a Customs House Agent and Steamer Agent.  The demands have been raised on reimbursable expenses like operational surplus and freight brokerage. 

In the present case,  the Department does not have a case that the appellant has not discharged Service Tax on the agency commission received as a Steamer Agent or CHA.  A two-member bench of Ms Sulekha Beevi C S Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical) observed that the Service Tax on the amount received as a sub-contracting CHA was not paid by them as during the relevant time the Board had clarified that the activities of a sub-contracting CHA is not subject to levy of Service Tax. 

The bench held that there was no suppression of facts on the side of the appellant.  The appellant succeeds on limitation also. While allowing appeal, the CESTAT set aside the impugned order.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates