No service tax leviable on ocean freight charges which does not falls under Business Support Services: CESTAT [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that service tax is not leviable on the ocean freight charges in the freight forwarding services which do not fall under the category of business support services. 

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 as per Section 67 of the Finance Act, 1994, the value of taxable service shall be the gross amount for providing such service and the ocean freight was not a charge incurred by the assessee in the course of providing freight forwarding service. 

Also submitted that the assessee made payment to the shipping liners for transportation of cargo of its clients and recovers the same from its clients and hence, ocean freight do not form part of the value of taxable service rendered by the assessee as freight forwarding service. 

K. Komathi, the counsel for the department contended that the assessee was liable to pay Service Tax on the ocean freight charges collected by them as these fall under Business Support Services. 

The Bench observed that the freight was paid to the shipping line and freight was collected from the client- shippers in two independent transactions. Thus the demand for Service Tax on ocean freight charges cannot be sustained and requires to be set aside. 

The two-member bench comprising Sulekha Beevi (Judicial) and P. Anjani Kumar ( Technical) quashed the demand for service tax on the ocean freight charges collected by the assessee while allowing the appeal filed by the assessee. 

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