Custom, Excise & Service Tax Tribunal
North Star Shipping Services Pvt Ltd vs Cst Ch on 28 April, 2026
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL CHENNAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No.41677 of 2016
(Arising out of Order-in-Appeal No.253/2016 (STA-I), dated 27.04.2016 passed by
Commissioner of Service Tax (Appeals-I), Newry Towers, 2054/1, II Avenue, 12 th
Main Road, Chennai 600 040)
M/s. North Star Shipping Service Pvt. Ltd., .... Appellant
No.18, Old No.891
Jaffer Saramg Street
Mannady, Chennai 600 001
VERSUS
Commissioner of GST & Central Excise ... Respondent
Chennai North Commissionerate 29/1, Mahatma Gandhi Road Nungambakkam, Chennai - 600 034 APPEARANCE:
For the Appellant : Ms. Radhika Chandra Sekhar, Advocate For the Respondent : Ms. G. Krupa, Authorised Representative CORAM :
HON'BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V, MEMBER (JUDICIAL) FINAL ORDER No.40544/2026 DATE OF HEARING: 20.01.2026 DATE OF DECISION: 28.04.2026 Per AJAYAN T.V.
The appellant, North Star Shipping Services Pvt. Ltd., is challenging the Order-in-Appeal No.253/2016 (STA-I) dated 27.04.2016 (impugned order), whereby the Appellate Authority has rejected the Appeal and upheld the Order in Original of the Adjudicating Authority.
2. Brief facts as culled out from the appeal records are that the appellant is registered as a service provider of Custom House Agent's service. In pursuance of earlier investigation into the receipts/income of the appellant that were not included in the taxable value, show cause notice was issued covering the period up to 31.03.2005. Thereafter, pursuant to the Department calling for, inter-alia, appellant's balance sheet, P & L account and schedules vide letter 2 dated 10.06.2008, the appellant vide letter dated 01.07.2008 provided the same. The Department was of the view that CBEC circular dated 06.06.1997 communicated vide Chennai Central Excise Commissionerate Trade Notice No.9/97 dated 09.06.97 excludes expenses such as statutory levies and various reimbursable charges, incurred by the CHA on behalf of the client from the taxable value. Therefore, as a corollary, those amounts recovered from the client on account of reimbursable expenses but not actually incurred either fully or partly by the CHA cannot be excluded from the gross amount computed from the taxable value. Further, Department was of the view that consequent to the notification of the Service Tax (Determination of Value) Rules, 2006, in terms of Rule 5(2) expenditure or costs incurred by the service provider as a pure agent of the recipient of the service in conformity with the definition of 'pure agent' contained in the Explanation 1 appended thereto, shall only be excluded subject to satisfaction of the conditions stipulated therein. Conversely, the amount recovered from the recipient of the service and above the actual expenses incurred cannot be deducted from the gross amount computed as taxable value and such amount form part of the consideration received by the CHA for rendering taxable service. On scrutiny of the appellant's balance sheet, P & L account and schedules, it was seen that the appellant had not discharged service tax on certain surplus income towards clearing and forwarding, due agent charges, documentation, incentives and commission and brokerage. It also appeared to the Department that the appellant had eared commission on Airfreight as an ITAT accredited cargo agent and also had received incentive from steamer agents/shipping lines for referring exporters which are taxable under the category of business auxiliary service. The Department therefore issued an SCN dated 30-06-2009 for the period 2005-06, 2006-07 and 2007-08 alleging that the non-inclusion of the receipts/income in the determination of taxable value as declared in the ST-3 returns was in contravention of Section 67 of the Finance Act, 1994 (Act) as amended read with the Board's Circular for the material period and Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 and therefore the appellant had failed to discharge the appropriate service tax liability. It was also alleged that the receipts and income 3 representing the commission on Airfreight and that received from steamer agents amount to taxable service under the category of business auxiliary services as defined under Section 65 (105) (zzb) as the said activity amounts to promotion or marketing of service provided by such Airlines/Steamer Agents/Shipping Lines. The SCN invoked extended period of limitation alleging that the appellant had not furnished or disclosed the details of receipt/income towards rendering the taxable service to the Department in the ST-3 returns or in any other manner and has thus suppressed the fact from the Department with the intention to evade payment of service tax. The SCN demanded the service tax along with applicable interest and proposed imposition of penalties. Pursuant to the Appellant's reply contesting the allegation and invocation of extended period of limitation, after due process of law, the Adjudicating Authority, vide Order in Original No.57/2012 dated 31.05.2012, confirmed the demand of service tax of Rs.34,00,049/- along with applicable interest and imposed an equivalent penalty under Section 78 of the Act. Aggrieved, the appellant preferred an appeal before the Commissioner (Appeals-I). However, the Appellate Authority rejected the appeal and upheld the Order in Original of the Adjudicating Authority. Aggrieved, the Appellant has preferred this Appeal against the impugned order.
3. Ms. Radhika Chandrasekhar, Ld. Advocate appearing for the appellant contended that during the course of rendering CHA service the Appellant incurred certain expenses on behalf of the client such as clearing and forwarding charges, due agent charges, and documentation charges that were reimbursed by the client. The Appellant also purchased cargo slots from various Airlines/Shipping lines and subsequently sold the same to shippers and earned profit. The Airline/shipping lines give commission/incentive to the Appellant to encourage more purchase by the Appellant. Ld. Counsel contends that in the reply of the Appellant it was explained that the Appellant had paid service tax for the CHA services rendered. With respect to the surplus, the Appellant had submitted that there was a markup only on documentation charges and appropriate service tax on the same has been discharged along with proof of the same. It was 4 mentioned that with respect to C & F charges and Due Agent Charges there was no markup/surplus and that all conditions of pure agent was complied with and therefore the reimbursed amounts are not includible in the taxable value. Regarding the incentives received from the liner it was submitted that the Appellant was not providing any service to the Liners.
4. Ld. Counsel further contends that service tax is to be paid only on services actually provided by service provider and that on the consideration received for the CHA service the appellant had already discharged service tax. Service tax is not leviable on the reimbursed expenses incurred on behalf of the client. Reliance is placed on the appellant's own case, M/s. North Star Shipping Services Pvt Ltd v. Commissioner of GST & Central Excise, vide Final Order No.41013/2025 dated 11.09.2025, UOI v. Intercontinental Consultants & Technocrats (P) Ltd, [2018] 91 taxmann.com 67 (SC), International Clearing and Shipping Agency v. CGST & CE, (2024) 15 Centax 357 (Tri-Mad).
5. Ld. Counsel further contends that the appellant buys cargo space in various airlines/shipping lines for international movement of cargo and receives commission/incentives from the airline/shipping line based on the volume of business. The cargo space is then sold to the exporters. The service rendered by the Appellant is to the exporter and no service is provided to the Airline/Shipping Line by the Appellant. There is no Service provider-Service recipient relationship between the Appellant and the Airline/Shipping Line. Therefore, the discount given by the Airline/Shipping line is not a consideration to be subjected to service tax. It is contended that the Appellant is not marketing or promoting the business of the Airline/Shipping Line to be covered by Business Auxiliary Service and that such transactions have already been examined and settled in favour of the assessee as can be seen from the decisions in International Clearing and Shipping Agency v. CGST & CE, (2024) 15 Centax 357 (Tri- Mad) and AVR Cargo Agency Pvt Ltd.(2018) 97 taxmann.com 221 (Chennai-Cestat).
56. Ld. Counsel also contends that extended period is not invokable as none of the ingredients that are required for invoking the extended period are present. It has also been held that when a notice is issued for subsequent period for the same issue, extended period cannot be invoked as the department is already aware of the details. Reliance is placed on the decisions in Nizam Sugar Factory v CCE, (2006) 197 ELT 465 (SC) and ECE Industries Ltd v. CCE, (2004) 164 ELT 236.
7. Ms. G. Krupa, Ld. Authorised Representative, appearing for the respondent submitted that in the instant case various costs incurred by the Appellant cannot be termed as reimbursable expenses as these would be integral to the running of the business of the Appellant. Moreover, the Appellant had not produced any documents or any bills to show that the above charges collected was reimbursed to them by the service receiver. All the costs are obviously charges directly linked to service of the Appellant namely CHA service so the claim of the Appellant to exclude them cannot be acceded to. As regards the issue of booking cargo spaces, Business Auxiliary service includes within its ambit a commission agent acting on behalf of another person. Here the Appellant had acted on behalf of the Airlines to book cargo spaces for various importers/exporters and for such services the airlines had paid them a commission which is consideration for the services rendered by the Appellant as an agent and thus the service so provided by the Appellant would fall under Business Auxiliary Service. Ld. AR prays that the appeal be dismissed. Reliance was placed on the decisions in Rama Mohana Rao v CCE, Guntur Final Order No.31013-31014/2019 dated 05-11-2019, Coromandel Shipping Agencies v CCE & ST, Vishakhapatnam -II, 2020 (34) GSTL 569 (Tri-Hyd), Broekman Logistics India Pvt Ltd v. CGST & CE, Chennai, 2020 (43) GSTL 545 (Tri-Chennai), Modern Business Solutions v CST, Ahmedabad, 2019 (24) GSTL 353 (Tri-Ahmd), Hindustan Oil Exploration v CGST & CE, Chennai, 2019 (25) GSTL 252 (Tri-Chennai), P.K.Ghosh & Sons v CST, Kolkata, 2017 (3) GSTL 429 (Tri-Kolkata) and Radioactive Entertainment v Commr of Goa, 2021 (45) GSTL 64 (Tri-Mumbai).
68. Heard both sides, perused the appeal records and the decisions submitted.
9. We find that the issues that arise for determination are:
a) whether the demand of service tax on certain expenses stated to be incurred on behalf of the client and stated to be reimbursed by the client, in the course of providing CHA services, and which has been upheld in the impugned order by invoking provisions of Rule 5 (1) and 5(2) of the Service Tax (Determination of Value) Rules, 2006 read with Section 67 of the Finance Act, 1994, is tenable.
b) Whether the demand of service tax, on the activity of booking cargo spaces by the appellant for the various importers/exporters on the allegation that the appellant had acted on behalf of the airlines and that on the incentive received from the steamer agents/shipping lines on the allegation that it is for referring exporters to transact business with such agents/liners is tenable.
10. We find that a coordinate bench of this Tribunal in the appellant's own case, vide Final Order No.41013/2025 dated 11.09.2025 in the case of M/s. North Star Shipping Services Pvt Ltd v. Commissioner of GST & Central Excise has rendered findings on the issues involved in the appellant's favour. The relevant portions of which are reproduced below: -
"12. The issues that arise for determination are: -
i Whether the appellant is liable to pay service tax on the reimbursement of expenses recovered during rendering CHA activities?
ii Whether the Appellant is liable to pay service tax on the incentive/commission received for sale of cargo space?
Whether the appellant is liable to pay service tax on the reimbursement of expenses while rendering CHA service?
13.1 We find that the Adjudicating Authority has in the impugned Order-in-Original placed reliance on Rule 5(1) and Rule 5(2) of the 7 Service Tax Valuation Rules, 2006 read with Board's Circular dated 21.12.2009 to determine when the reimbursable charges are eligible for exclusion and thereby in confirming the demands in so far as the reimbursable expenses are concerned. We find that the issue of whether service tax is applicable on reimbursement of expenses is no longer res-integra in view of the Supreme Court's ruling in the case of UOI vs. Intercontinental Consultants & Technocrats (P) Ltd. [(2018) 91 67(SC)]. The relevant extract of the ruling is reproduced below: -
"24) In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'. That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 01, 2006) or after its amendment, with effect from, May 01, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider 'for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service.
25) This position did not change even in the amended Section 67 which was inserted on May 01, 2006. Sub-section (4) of Section 67 empowers the rule making authority to lay down the manner in which value of taxable service is to be determined. However, Section 67(4) is expressly made subject to the provisions of sub-
section (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider.
26) It is trite that rules cannot go beyond the statute. In Babaji Kondaji Garad, this rule was enunciated in the following manner:
8"Now if there is any conflict between a statute and the subordinate legislation, it does not require elaborate reasoning to firmly state that the statute prevails over subordinate legislation and the bye- law, if not in conformity with the statute in order to give effect to the statutory provision the Rule or bye-law has to be ignored. The statutory provision has precedence and must be complied with."
27) The aforesaid principle is reiterated in Chenniappa Mudaliar holding that a rule which comes in conflict with the main enactment has to give way to the provisions of the Act.
28) It is also well established principle that Rules are framed for achieving the purpose behind the provisions of the Act, as held in Taj Mahal Hotel:
'the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect."
29) In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with 'consideration' is suitably amended to include reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the learned counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited8 wherein it was observed as under:
"27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a 9 series of statements, such as one finds in a work of fiction/non- fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of "interpretation of statutes". Vis-à-vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof.
28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities."
Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1] , a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
29. The obvious basis of the principle against retrospectivity is the principle of "fairness", which must be the basis of every legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita- Shinnihon Steamship Co. Ltd. Thus, legislations which modified accrued rights or which 8 (2015) 1 SCC 1 impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later."
1030) As a result, we do not find any merit in any of those appeals which are accordingly dismissed."
13.2 Thus, following judicial discipline, we order that reimbursement of expenses is not subject to levy of service tax.
Whether the Appellant is liable to pay service tax on the incentive/commission received for sale of cargo space? 14.1 The second issue is whether purchase of cargo slots from various Airlines/Shipping-line and subsequent sale of the same to shippers and thus earning profit is taxable under "Business Auxiliary Service"
or not. The Airline/Shipping line gives commission/incentive to the Appellant to encourage more purchases by the appellant.
14.2 The said issue is no also longer res-integra in view of the following judgments of this Tribunal: -
a) AVR Cargo Agency Pvt. Ltd. [(2018) 97 taxmann.com 221 (Chennai CESTAT)]: -
"5. The issue whether the respondent is liable to pay service tax for the activity of booking space and selling the same to the client for air cargo goods has been decided by the Tribunal in the decisions cited by the ld. Counsel for the respondent. The Tribunal has held the issue in favour of the respondent. The relevant portion of the decision in the case of Continental Carriers (supra) is reproduced as under :-
"5. We have heard both sides and perused the material available on record. We note that the tax liability on similar activities under the category of 'Business Auxiliary Service' has already come up for consideration before the Tribunal in the above mentioned cases and Service Tax Appeal No.40895 of 2015 the Tribunal in the case of DHL Logistics (P) Ltd. (supra) has observed that: "4.2. Demand has been made on service tax under the head of Business Auxiliary Service for the revenue earned as freight rebate. Ld. Counsel has argued that the income is generated as a result of appellants buying cargo space in bulk and selling the same to foreign shipper, he argued that various essential activity in which there is no third party involved except the appellant and the carriers. In these circumstances demand under Business Auxiliary Service cannot sustain. It is argued that for sustaining demand under BAS, there has to be third party involved in the transaction namely a client. In the absence of any client, no demand under BAS can be raised. We find substantial force in the argument of Ld. Counsel, the freight rebate is a revenue stream generated out of trading of the space in the airline incentives. Unless the space is booked by the appellant specifically for a client the components of the 11 Business Auxiliary Service do not come into play. In the instant case. there is no such allegation and the appellants are booking the space for their own trading activities. In these circumstances demand of service tax under BAS cannot be sustained and the same is set aside.
4.3. The next issue relates to the income under the head of airline commission and airline incentive sought to be taxed under BAS. It is seen that the said income is generated during the course of booking of bulk cargo by the appellant with the airline. The appellant have received the incentive and commission from the airline. The appellants are engaged in buying and selling of space in the airline and depending on the volume of the space bought by the appellant from the airlines they received the commission/incentive. The appellants are not buying and selling space on the airline on behalf of their client but on their own behalf. To consider the activity of buying and selling the taxable activity under the head of BAS, the same should be done on behalf of the client Thus, if the appellants were selling the space on carrier from the airline directly to the exporters without themselves purchasing the space then it could have been considered as an activity involving promotion of sales. In the instant case the appellant are directly buying themselves and thereafter selling the same to the exporters. In this activity they are receiving incentive and commission based on the total space purchase by them from the airline. This activities can be no stretch of imagination by considered as BAS Service Tax Appeal No.40895 of 2015 as for any service to statute the BAS at least three parties should be involved in the transaction namely the service provider, service recipient and the client. In the instant case there are only two parties in the transaction, the seller of space and the buyer of space. Any commission/incentive received, as a result of this transaction of sale cannot be considered as supply of BAS. In view of above, the demand under the head of BAS for the Revenue generated as airline/airline incentive is set aside."
6. Similar ratio has also been followed in the case of Karam Freight Movers (supra). The observations of the Tribunal are as below :
"11. On the second issue regarding the service tax liability of the respondent under BAS, we find that the impugned order examined the issue in detail. lt was recorded that the income earned by the respondent, to be considered as taxable under any service category, should be shown to be in lieu of provision of a particular service. Mere sale and purchase of cargo space and earning profit in the process is not a taxable activity under Finance Act, 1994. We are in agreement with the findings recorded by the original authority, In this connection, we refer to the decision of the Tribunal in Greenwich Meridian Logistic (I) Pvt Ltd. v CST, Mumbai - 2016 (43) STR 215 (Tri-Mumbai) = 2016- TIOL-869-CESTAT-MUM.
The Tribunal examined similar set of fact and held that the appellants often, even in the absence of shippers, contract for space or slots in vessels in anticipation of demand and as a distinct business activity. It is a transaction between principal to principal and the freight charges or consideration for space procured from shipping-
lines. The surplus earned by the respondent arising out of purchase and sale of space and vessel. It cannot be considered 12 that the respondents are engaged in promoting or marketing the services of any "client"."
7. As the issue has already been decided in favour of the assessee-respondents in the above mentioned orders of the Tribunal, we find no merit in the present appeal filed by the Revenue and the same is dismissed'.
b)International Clearing and Shipping Agency vs. Commissioner of GST and Central Excise [(2024) 15 Centax 357 (Tri. Mad)]: -
"7.4.1 The third issue is the demand raised on freight and brokerage, etc. The Ld. Counsel submitted that the appellant receives a brokerage / rebate from the shipping line on the ocean freight that they have to pay to the shipping lines. It is in the form of the discounts or incentives paid to the CHA and such amount is not a consideration for providing any CHA services. In fact, the appellant does not provide any CHA service to the shipping line. They act as an agent on behalf of the importer / exporter. So the incentive or the discount received by the appellant from the shipping line cannot be treated as a consideration received for CHA services. In the case of Commissioner of Service Tax, New Delhi Vs. Karam Freight Movers [2017 (4) GSTL 215 (Tri. Del.)], the Tribunal observed that the mark-up value collected by the assessee from the exporter is an element of profit in the transaction. The said amount is not a commission earned by the assessee and is not while acting as an agent of the exporter or shipping line and cannot be considered as a consideration. The assessee while acting as an agent on behalf of the shipping line was discharging the Service Tax as Steamer Agency services. The Tribunal took the view that the mark-up value collected by the assessee being an element of profit in the transaction cannot be subject to levy of Service Tax. Similar view was taken by the Tribunal in the case of Commissioner of Service Tax, New Delhi Vs. M/s. Continental Carriers [2017-TIOL-3964-CESTAT-DEL] and in the case of Greenwich Meridian Logistics (I) Pvt. Ltd. vs. Commissioner of Service Tax, Mumbai [2016 (43) STR 215 (Tri. Mumbai)]. In the present case also the Department does not have a case that the appellant has not discharged Service Tax on the agency commission received as a Steamer Agent or CHA. The demand is raised on the mark-up made which is the profit out of the 13 difference in value of ocean freight collected by the shipping line and paid by the exporter / client. The Tribunal in the case of Greenwich Meridian Logistics (1) Pvt. Ltd. (supra) held as under:-
"13. The notional surplus earned thereby arises from purchase and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) of Finance Act, 1994 will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed.
14. We, therefore, find no justification for sustaining of the demand and, accordingly, set aside the impugned order. Demands, with interest thereon, and penalties in both orders are set aside. Cross-objections filed by the department are also disposed of."
7.4.2 Following these decisions, we are of the opinion that the demand of Service Tax on freight brokerage cannot sustain and requires to be set aside. Ordered accordingly."
14.3 We also find that this Bench of the Tribunal in the case of M/s. International Clearing & Shipping Agency Versus Commissioner of GST & CE, Chennai North Commissionerate [2025 (2) TMI 615-CESTAT CHENNAI] has followed the earlier ruling of International Clearing & Shipping Agency (referred supra). Judicial discipline demands to follow the same order where the facts and circumstances are identical. Thus, by following judicial discipline, we set aside the demand pertaining to margin made on sale of cargo.
15. In view of the above findings, the impugned Order-in-Appeal No. 13/2015 dated 11.01.2015 passed by Commissioner of Service Tax (Appeals-I), Chennai is set aside. Thus, the appeal is allowed with consequential relief, if any as per law."
11. We have examined the decisions cited by the Ld. A.R. and find that they have been rendered in the facts and circumstances obtaining therein and are distinguishable from the facts of this case. The decision in P.K.Ghosh was rendered before the Apex Court decision in Intercontinental Consultants cited supra and the decision in Hindustan Oil Exploration cases has been rendered without noticing the Apex Court decision in Intercontinental Consultants & Technocrats cited supra. The decision in Modern Business Solutions was in respect of Business Auxiliary services rendered in the context of services provided to ICICI Bank which the appellant was contesting contending that it was manpower supply. The decision in 14 Broekman Logistics was in the context of a specific plea of the consultant therein. In the case of Coromandel Shipping Services, the appellant was also undertaking cargo handling services that was being sought to be classified as port services by the Department. In the decision in Radioactive Entertainment, in the context of event management services, matter was remanded to be decided in light of the aforesaid decision in Intercontinental Consultants. The decision in Rama Mohan Rao v CCE does not distinguish the inapplicability of Intercontinental Consultants & Technocrats cited. In the instant case, indisputably the SCN itself admits that the verification of service tax payments in terms of the ST-3 returns filed by the appellant vis a vis income accounted indicates that on the receipts reflected under the head 'Agency Fees' the appellant has discharged its service tax liability. Thereafter, it proceeds to invoke Section 67 read with Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 to allege that the appellant had failed to discharge its service tax liability. The OIO also invokes Rule 5(1) and 5(2) of the Rules ibid and goes on to hold that that the charges collected from the clients are to be treated as expenditure or costs incurred by the Appellant in the course of providing taxable service and all such expenditure or costs form part of taxable value provided and are liable to be included in the gross value for the purpose of charging service tax on Custom House Agent Service as per provisions of Section 67 of the said Act read with Rule 5 (1) of the Valuation Rules ibid. Indisputably, the Appellate Authority too invokes these Rules for upholding the demand confirmed by the Adjudicating Authority. It is pertinent to note that this very bench of the Tribunal has in its decision in M/s. Seaport Lines India (P) Ltd v. Commissioner of GST and Central Excise, Chennai, 2026 (3) TMI 979-CESTAT CHENNAI, after observing in para 17 thereof that the issue on levy of service tax on expenses that are reimbursed by the customers to the Service Provider, is no more res-integra in view of the decision of the Honourable Supreme Court in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd, 2018 (10) GSTL 401 (SC) which has considered the issue of liability to pay service tax on such expenses received by the service provider in the course of rendering services for the client, apart from the consideration received for 15 rendering the services on which the client has discharged the liability to pay service tax, gone on to hold in para 18 as under:
"18. Thus, the law of the land as laid down by the Apex Court in its decision in Union of India v Intercontinental Consultants and Technocrats Pvt Ltd, 2018 (10) GSTL 401 (SC), puts it beyond the pale of any controversy that Section 67 which deals with valuation of taxable services for charging service tax does not provide for inclusion of the aforesaid expenditure or cost incurred while providing the services as they cannot be treated as element/components of service, till the amendment to Section 67 made effective from May 14, 2015. Concededly, the period involved in the present Appeals are from 01-04-2013 to 31-03-2015, and hence the aforesaid decision would squarely apply, rendering the entire demand confirmed in the impugned order unsustainable and liable to be set aside on this count alone."
Admittedly, the period involved in the instant case is prior to May 14, 2015. It is also pertinent that the practice adopted by Custom House Agents and the various reimbursables claimed as not includible were also noticed by the Apex Court in its decision in Intercontinental Consultant case. We are therefore of the considered view that when Rule 5 ibid itself has been held to be ultravires Section 67, by the Apex Court in Union of India v Intercontinental Consultants and Technocrats Pvt Ltd, 2018 (10) GSTL 401 (SC) as noticed supra, the very statutory basis to treat any expenditure or costs incurred by the service provider in the course of providing taxable service as consideration for the taxable service provided and to be included in the value for the purpose of charging service tax ceases to exist. Therefore, we have no hesitation in holding that the demand of service tax which has been upheld in the impugned order by invoking provisions of Rule 5 (1) and 5(2) of the Service Tax (Determination of Value) Rules, 2006 read with Section 67 of the Finance Act, 1994, are wholly untenable and are liable to be set aside. We notice that the decision in CST, Chennai v. Sangamitra Services Agency, 2014 (33) STR 137 (Mad), also supports the stand of the Appellant in this regard.
1612. As regards the demand of service tax, on the activity of booking cargo spaces by the appellant for the various importers/exporters on the allegation that the appellant had acted on behalf of the airlines, and that on the incentive received from the steamer agents/shipping lines on the allegation that it is for referring exporters to transact business with such agents/liners, in view of the decision in the appellant's own case as well as in the case of International Clearing and Shipping Agency v. CGST & CE, (2024) 15 Centax 357 (Tri-Mad) and AVR Cargo Agency Pvt Ltd.(2018) 97 taxmann.com 221 (Chennai-Cestat) relied on by the appellant, as has been noticed supra, we find the said demand wholly untenable.
13. In any event, Revenue has not shown to us that the aforesaid Final Order in the appellant's own case, vide Final Order No.41013/2025 dated 11.09.2025 in the case of M/s. North Star Shipping Services Pvt Ltd v. Commissioner of GST & Central Excise, has not attained finality. Therefore, when the lis regarding the nature of the particular transaction and its exigibility to service tax inter se the parties has attained finality and all the more when there is no allegation or evidence that the present transactions are of a different nature, that forms yet another compelling reason to decide the present dispute in the Appellant's favour. The decisions in CCE, Mumbai v Bigen Industries Ltd, 2006 (197) ELT 305 (SC) and Jayswals Neco Ltd v. CCE, Nagpur, 2006 (195) ELT 142 (SC) refer in this regard.
14. Furthermore, the Ld. Counsel also contented that extended period is not invokable as none of the ingredients stated in proviso to Section 73 (1) required for invoking the extended period are present. It was also argued further that since the department had issued an earlier SCN, the department could not have invoked the extended period, as the department is aware of the activity of the Appellant. Reliance was placed on the decisions in Nizam Sugar Factory Vs. CCE, 2006 (197) ELT 465 (SC), and ECE Industries Ltd. Vs. CCE, 2004 (164) ELT 236 (SC). We find that the present SCN itself concedes that consequent to an earlier investigation into the receipts and income of the appellant as accounted in their books of accounts, 17 SCN was issued covering the period upto 31.03.2005. Therefore, we find merits in the aforesaid contention of the appellant that invoking the extended period of limitation in the present SCN issued on 30- 06-2009 was untenable on this count alone.
15. That apart, while extended period has been invoked, there is no evidence let in of any positive act of suppression or willful misstatement with intent to evade payment of service tax by the Appellant so as to satisfy the ingredients required to invoke the extended period of limitation. It is a settled position in law that the burden to show that the Appellant is exigible to tax as alleged and that the Appellant has willfully suppressed facts or made any misstatement with intent to evade payment of duty lies heavily on the Revenue and we find that the said burden has not been discharged in this instance rendering the invoking of extended period untenable. Decisions abound, and a reference to the Judgements of the Apex Court in CCE v. H.M.M. Ltd, 1995 (76) ELT 497, Pushpam Pharmaceuticals Company v CCE, Bombay, 1995 (78) ELT 401 (SC) and Uniworth Textiles v CCE, Raipur, 2013 (288) ELT 161 (SC) would amply suffice. Hence, we hold that Department could not have invoked the extended period of limitation under these circumstances.
16. In light of our deliberations above, and relying on the Apex Court decisions as well as following the coordinate bench decisions cited above, we hold that the impugned order in appeal is untenable and is therefore set aside.
The appeal is allowed with consequential relief(s) in law, if any.
(Order pronounced in open court on 28.04.2026)
(AJAYAN T.V.) (M. AJIT KUMAR)
Member (Judicial) Member (Technical)
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