The Delhi bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that buying and selling space on ships does not amounts to service, service tax not leviable on such markup.
M/s. Tiger Logistics (India) Ltd, the appellant challenged the part of the order passed by the Commissioner Adjudication, Central Tax, GST, East that confirms the demand of service tax amounting to Rs. 5,65,06,546/- with interest under section 75 of the Finance Act, 1994 and penalty under section 78(1), 77(1)(a), 77(2) and 70 of the Finance Act.
The appellant engaged in providing the Customs clearance of cargo on behalf of the clients, Along with customs clearance, transportation service as an incidental service to the clients; and Freight forwarding.
The actual amount of freight paid by the appellant to the airlines or shipping lines may be more or less than the amount of freight agreed to with the customer; the differential being the profit or loss accruing to the appellant from the sale of cargo space. The appellant claims to act on a principal-to-principal basis with their clients for rendering this service.
The issue involved in this appeal is regarding demand of service tax on the Mark Up/Differential Ocean Freight, Container Detention Charges, Toll Tax, Brokerage, Forklift Charges, Fumigation Charges and Sundry Charges.
The order dated 18.11.2021 passed by the Commissioner adjudicates the Statement of Demand dated 22.12.2017 as also the Statement of Demand dated 29.09.2020. The former Statement of Demand proposed a demand of Rs. 2,48,97,489/- for the taxable services rendered by the appellant during the period 01.03.2015 to 31.03.2017 after mentioning that the legal provisions regarding the issues had been discussed in detail in the show cause notice dated 23.04.2015 issued by the Principal Commissioner.
The latter Statement of Demand proposed a demand of service tax amounting to Rs. 3,16,09,047/- for the taxable services rendered by the appellant for the period 01.04.2017 to 30.06.2017. This Statement of Demand also mentioned that the legal provisions on the issues had been discussed in detail in the earlier show cause notice dated 23.04.2015 issued by the Principal Commissioner.
It was evident that the appellant provides cargo space to customers who are importers/exporters of goods. The appellant pays charges for space booking to different Shipping Lines/Airlines and later on sells such space to the exporters/importers at a slightly higher amount.
The difference between the amount paid by the appellant to the Shipping Lines/Airlines and the amount recovered by the appellant from the customers (exporter/importers) is called the “mark-up”.
In Marinetrans India Pvt. Ltd. vs. CST, it was held that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions would not be leviable to service tax.
A two-member bench comprising Justice Dilip Gupta, President and Ms. Hemambika R Priya, Member (Technical) set aside the demand of service tax on mark up on ocean freight, container detention charges and toll taxes.
Further set aside the plea of the appellant that service tax to the extent not disputed and paid with interest and covered by section 73(3) of the Finance Act is accepted and the demand raised in the show cause notice to that extent.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
