Freight forwarding Services Consumes Inside SEZ are Eligible for Service Tax Exemption under Exemption Notification: CESTAT

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the freight forwarding services which was consumed inside the Special Economic Zone (SEZ) are eligible for the service tax exemption under the exemption notification. 

Geodis Overseas Private Limited, the appellant assessee was a freight forwarder and is engaged in freight forwarding of import and export shipments and provides various services and collects charges like Bill of Lading-fee, handling charges, etc., on which they pay Service Tax and also collect ocean freight charges from their customers and pay the same to shipping lines/shipping companies. 

The original authority confirmed the demand for service tax and penalty on the ocean freight charges collected by the assessee in respect of freight forwarding services. 

Raghavan Ramabadran, the counsel for the assessee contended that the word ‘consumption’ ought not to be given a narrow interpretation to mean the physical location of the provider or provision of service, but ought to be construed as a service used by an SEZ unit. 

Also submitted that the assessee provided event management services to the unit and it was a co-sponsor for the event which helped to advertise of product of SEZ even if the event was held outside, since the services were for the advertisement of the product of SEZ, the services provided was to be considered as consumed within SEZ. 

K.Komathi, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee which was a SEZ unit was not eligible for refund/credit in terms of Notification No. 04/2004the input services for the reason that the services are not physically consumed within the SEZ unit. 

The Bench observed that the department cannot contend that these services are not eligible for refund since these are not consumed within SEZ and the denial of benefit was unjustified. 

The two-member bench comprising Sulekha Beevi (Judicial) and Anjani Kumar (Technical) quashed the service tax demand and held that the assessee was eligible for service tax exemption while allowing the appeal filed by the assessee. 

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