CESTAT Quashes Service Tax Demand on Payment of Address Commission on ground of Non-inclusion of Activity under ‘BAS’ [Read Order]

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand on the payment of address commission on the grounds of non-inclusion of activity under ‘Business Auxiliary Service’(BAS). 

Apeejay Shipping Limited, the appellant assessee are owners of ships and engaged in providing ships on a hire basis, which in the common trade parlance, is known as ‘Chartering of Ships, and the ships are given on hire either for a specific period or for a single voyage and the ships are given on hire by entering into contracts with the respective charterers/parties. 

In terms of the contractual arrangement, the charterers hire the ships and the assessee allows a specified percentage of discounts from the freight/hire charge, which was commonly known as ‘Address Commission’. 

The assessee appealed against the order passed by the Commissioner of Service Tax for confirming the demand for service tax of Rs.1,56,27,124/- along with interest and imposed an equal amount of tax as a penalty. 

Somak Basu and Swagato Kabiraj, the counsels for the assessee contended that either in the Show Cause Notice or in the impugned order, there was no mention of the sub-clause of the taxable service under BAS, under which ‘Address Commission’ would fall. 

J. Chattopadhyay, the counsel for the department relied on the decision made by the lower authorities and contended that the discounts from the Hire Charges were allowed by the assessee only to promote their business and therefore, it should be treated as a ‘commission’ and leviable to service tax under the category of ‘Business Auxiliary Service’ (BAS). 

The Bench observed that no service tax was payable on the discounts as address commission the demand was not sustainable and the activities were not covered under BAS. 

The two-member bench comprising Muralidhar (Judicial) and Anpazhakan (Technical) quashed the service tax demand while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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