The Delhi bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the transportation of goods for domestic and international trade is exempted from “Business Auxiliary Services” (BAS), and therefore no service tax demand can be made.
The facts of the case are that the assessee, India Infrastructure & Logistics Private Limited Engaged in the business of rail freight and transportation services for both domestic and international trade, was being taxed under the category of “Business Auxiliary Services” ( BAS ). The appellant, who facilitates end-to-end goods transportation for imports and exports, including booking space on liner ships, challenged the demand on the grounds that there was no agency relationship between the appellant and its customers.
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Mr. Sanjeev Nair, representing the appellant, argued that the services provided do not fall under BAS as defined in the Finance Act, 1994. He explained that the appellant does not act as an agent for its customers or the shipping liner and that the contracts with the liner are independent, principal-to-principal transactions. He emphasized that the appellant is the primary service provider and bears all contractual responsibilities, eliminating any possibility of an agency relationship.
The department, represented by Mrs. Jayakumari, contended that similar cases, such as M/s Olam Agro India Limited, supported the view that corporate guarantees provided by third parties constitute a taxable service. However, this was countered by citing previous tribunal decisions, notably Commissioner of CGST & Central Excise Vs. Edelweiss Financial Services Ltd, which held that for a service to be taxable, there must be both a service provider and a flow of consideration. In the absence of these elements, taxability under section 66B of the Finance Act, 1994 does not arise.
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In a similar case (Greenwich Meridian Logistics Pvt Ltd.), the tribunal ruled that transactions involving the purchase and sale of shipping space do not fall within the scope of BAS, as they are principal-to-principal transactions, and no agency relationship exists.
Considering the facts and prior rulings, the two member bench of the tribunal comprising Dr. Rachana Gupta (Judicial member) and Hemambika R. Priya (Technical member) found no justification for the service tax demand and set aside the impugned order. Consequently, all demands, interest, and penalties were nullified, and the department’s cross-objections were dismissed.
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