CESTAT quashes Penalty imposed for Non-payment of Service Tax on ‘Ocean Freight charges’ on Ground of Limitation [Read Order]

The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed for non-payment of service tax on ocean freight charges on the ground of time-barred by limitation. 

Progeon Global Forwarding Pvt. Ltd, the appellant assessee was engaged in arranging transportation of export and import cargo of their customers in containers by sea/air through the shipping lines/airlines, and the assessee collected charges from their customers as Ocean Freight both in the case of imports and exports. 

The assessee appealed against the order passed by the adjudicating authority for confirming the demand for service tax of Rs. 69,97,883/- along with appropriate interest and imposed penalties under section 78 of the Finance Act, 1994. 

S. Adithya, the counsel for the assessee contended that the extended period had been invoked only on the ground that they did not declare the taxable value and assess tax correctly with an intent to evade payment of duty. 

Also submitted that failure to declare freight in the return was with an intent to evade duty and hence extended period cannot be evoked in the absence of any finding of willful suppression. 

Rudra Pratap Singh, the counsel for the department contended that the amount collected as ‘Ocean Freight charges’ by the assessee from their customers was more than the ocean freight charges paid to the shipping companies, and the assessee bills their customers with various charges viz. freight charges, Delivery Order charges, documentation charges, Terminal Handling charges, etc and the service tax was discharged by the assessee on all charges except freight charges. 

The Bench observed that the lack of discussion and finding that there was suppression of fact or contravention of any of the provisions of the chapter or the rules made thereunder with intent to evade payment of service tax was fatal and the evocation of the extended period had not been correctly done. 

The two-member bench comprising P.Dinesha (Judicial) and Ajit Kumar (Technical) held that the demand was to be restricted to the normal period only and quashed the penalty imposed on the assessee. 

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