Custom, Excise & Service Tax Tribunal
Phoenix International Freight ... vs Mumbai Ii on 27 July, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: ST/217 & 235/2012
[Arising out of Orders-in-Original No: 12/ST/SB/2011-12 dated 13/01/2012 & 18/ST/SB/2011-12 dated 31/01/2012 passed by the Commissioner (TAR), Central Excise, Mumbai.]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Phoenix International Freight Services Pvt. Ltd.
Appellant
versus
Commissioner of Service Tax
Mumbai II
Respondent
Appearance:
Shri L. Badrinarayanan, Advocate with Shri Vinay Jain, Chartered Accountant for the appellant Shri Devendra Nagvenkar, Addl. Commissioner (AR) for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 27/07/2016 Date of decision: 27/07/2016 ORDER NO: ____________________________ Per: M V Ravindran:
These two appeals are directed against Orders-in-Original Nos: 12/ST/SB/2011-12 dated 13/01/2012 and 18/ST/SB/2011-12 dated 31/01/2012 passed by the Commissioner (TAR), Central Excise, Mumbai. Since both the appeals are raise identical issue they are being disposed off by common order.
2. The relevant facts that arise for consideration are that the appellant herein a multi-model transport agency and is engaged in various activities like business of booking of cargo on behalf of airlines, shipping lines, freight forwarders/freight consolidators for which they charge an amount from the clients under various heads. The appellants are registered with the service tax department for rendering of service like clearing and forwarding agency service, storage and warehousing service, business auxiliary service (BAS), business support service and transport of goods by road service. Investigation was carried out against the appellant for the evasion/short-payment of service tax for the various services rendered. After recording various statements, it was noticed by the department that during the period April 2004 to March 2009 appellant had not discharged correct service tax in respect of the services rendered by them. By coming to such a conclusion, a show cause notice dated 22nd April 2010 was issued by invoking the extended period of limitation directing the appellant to show cause as to why service tax demand be not raised on the following amounts received:
i. airline incentives income;
ii. net/surplus income earned as freight forwarder;
iii. Income earned as charge collection fees.
3. Revenue wanted to tax the above amounts under business auxiliary service. Appellant contested the show cause notice on merits as well as on limitation. The adjudicating authority by order-in-original dated 13/02/2012 confirmed the demands raised with interest and also imposed penalties. Against this order, the appeal filed is ST/217/2012. Subsequent show cause notice also issued within the limitation period for the very same demands and allegations which has been confirmed by the adjudicating authority by order-in-original dated 31/01/2012 which is contested in appeal ST/235/2012.
4. Learned Counsel appearing on behalf of the appellant submits that:
4.1. In respect of point of demand of service liability on net/surplus income earned as freight forwarder, the issue is now settled by the decision of the Tribunal in the case of Greenwich Meridian Logistics (India) Pvt. Ltd. v. Commissioner of Service Tax, Mumbai 2016-TIOL-869-CESTAT-MUM. It is his submission that on this issue, the facts are that, appellant book space in various shipping lines and sells the same space to their clients on a higher rate. The difference between the booking charges and the amounts earned by them is sought to be taxed under business auxiliary service which has been negative by the Tribunal in the case of Greenwich Meridian Logistics (India) Pvt. Ltd. (supra) and DHL Lemuir Logistics Pvt. Ltd. v. Commissioner of Central Excise, Thane I 2016-TIOL-1455-CESTAT-MUM.
4.2. As regards the service tax liability on airline incentives income, it is his submission that the said airline incentive is in respect of the cargo which has been booked by the appellant on behalf of the appellant. The appellant, after booking the cargo on behalf of the airline carried various activities relating to booking, preparation of bills, collection and realizing the payments, etc. which otherwise could have been carried out by the airlines. It is his submission that the said service rendered by the appellant will not fall under business auxiliary service by any stretch of imagination and service tax liability will not arise. He would advance the same arguments that they are not promoting or marketing the business of airlines as they are only booking the space in the airlines. He would submit that the decision of the Honble Supreme Court in the case of U P State Industrial Development Corporation [1997] 92 Taxman 45 (SC) and Kerala Publicity Bureau v. Commissioner of Central Excise 2008 (9) STR 101 (Tri.-Bang.) will be applicable and relies upon the decision for the proposition that the amounts which have been received by them from the airlines are incentives and hence not taxable under business auxiliary service.
4.3. As regards the demand of service tax on the income earned as charge collection fees he would submit that, charge collection fees is nothing but wherein the cost of transportation from origin to destination in India is being paid by the freight forwarder and such charges are being collected by them in addition to the consideration for the services and that such charges in effect do not represents the consideration for services bur recovered as reimbursements for expenditure and are chargeable to only service tax after 10/09/2006. He would rely upon the decision of the Tribunal in the case of Bax Global India Ltd. v. Commissioner of Service Tax, Bangalore 2008 (9) STR 412 (Tri.-Bang.) and British Railways Board v. Customs and Excise Commissioners (1977) 221 STC for the proposition that service tax demand on the entire amount collected is not sustainable.
4.4. As regards the service tax demand on these issues in appeal ST/217/2012, it is the submission that the demand which is confirmed by invoking the extended period of limitation is not applicable as the appellant has been filing regularly returns with the authorities indicating the amounts received by them. It is his further submission that in appeal ST/235/2012 they are not contesting the point (iii) i.e. charge collection fees but are contesting point no. (i) and (ii) and the arguments will be the same. He would submit that in appeal ST/235/2012 the period is within limitation.
5. Learned Departmental Representative, on the other hand, submits that the profits earned in trading of space in the shipping lines are the service rentals received from their customs. He would submit that the appellant books space in bulk in the shipping lines and trades in the same with the clients who want a particular space in the shipping line. It is his submission that this particular trading in space is nothing but rendering of service to the customers for the procurement of raw materials or in puts. He would also submit that the appellant has not intimated the department regarding these transactions. Hence the same escaped the tax liability. As regards the point No. (ii) i.e. incentives received from airlines, he would submit that it is on record that the appellant has promoted the business of the airlines by encouraging their clients to avail the benefit of particular airlines and the amounts paid to the appellant as incentives are nothing but amounts received for the services rendered in promoting the business of the airlines. It is his further submission that in respect of charge collection fees these are of charges for expenses incurred in respect of freight which are covered under the category of business auxiliary service.
6. We have considered the submissions made at length by both the sides and perused the records. The issue as stated by both the sides is regarding service tax liability on the appellant under the three different heads as putforth. We consider the three service tax demands individually.
Net income earned as a freight forwarder:
6.1. In this service Revenue wants to tax the appellant on the ground that he has earned additional amount from their clients on the space which has been booked by the appellant with particular shipping lines. Under this category, the appellant books space in advance in a shipping line, and as per the requirement of the customers sells the space to the customers in a particular shipping line at a premium or profit i.e., appellant books the space in advance with the shipping line, say for ` 100/- per sq. ft. and sells the space to any of the customers who would like to use the space at ` 115/- per sq. ft. The additional amount of ` 15/- earned by the appellant is being regarded by him as a profit in trading and selling of space. Revenues contention is that this amount is for the services rendered to the client. In our considered view, the appellant herein, under this head, is not rendering any service either to the shipping line or to the customers. The appellant books the space and make payment to the shipping line in advance and/or, as and when the bills is raised, and sells the same to their customers at a profit. The appellant is not rendering any service either to the shipping line or to its customers, more so, under business auxiliary service. This view of ours is fortified by the decision of this very same bench in the case of Greenwich Meridian Logistics (India) Pvt. Ltd. (supra) and by a coordinate bench of this Tribunal in the case of DHL Lemuir Logistics Pvt. Ltd. (supra). Since the issue involved in this case is already decided against the Revenue, respectfully following the same we set aside the impugned orders in both the appeals as regards the demand raised and confirmed under this issue.
Airline incentive income:
6.2. On perusal of the records, we find that the airline incentive scheme is nothing but an amount given by the airlines to the appellant for rendering various services related to booking, preparation of bill, collection of realization by the appellant on behalf of the airlines. This portion of the findings is not contested seriously by the appellant as it is undisputed and accepted that the appellant is rendering these kind of service which, in our view, would fall under the category of promotion and marketing of airline services. Inasmuch as the appellant is encouraging the various clines for booking the space in a specific airline, we do not find any merits in the submission made by the Learned Counsel on this point and we hold on merits against the appellant on this issue.
6.3. As regards the question on limitation in appeal ST/217/2012, on this point we find that they have very strong case on limitation as there was a confusion which may arose on this point as it is a question of interpretation. It was also brought to our notice that earlier show cause notice was issued on this issue and they were not adjudicated by the lower authorities. If that be so, the demand which is beyond the period of limitation from the date of issuance of the show cause notice in this appeal is hit by limitation while the demand within the limitation period in this appeal is liable to be upheld and confirmed.
6.4. In appeal ST/235/2012, the entire period of the demand on this issue is within the limitation period. For the above reason, we uphold the tax liability on this issue under business auxiliary service. In short, both the appeals service tax liability under the issue of airline incentive income is held as taxable within the limitation period under business auxiliary service and the said tax liability is upheld along with interest.
Income earned as charge collection fees:
6.5. On this issue we find this income is earned by the appellant for the charges incurred by them in respect of freight charged to their customers on a specific query from the bench, Learned Counsel was unable to justify that these were really reimbursements of the expenses/freight incurred by them. The adjudicating authority on this issue has categorically recorded that the appellant has recovered charge collection fees to cover the cost of financial and banking cost associated with the freight liability paid by them. In any case, we do find that the appellant is not seriously contesting the tax liability under this head. In appeal ST/217/2012 the demand under this head which is beyond the period of limitation is set aside for the same reason as indicated herein above in airline incentive scheme and the demands confirmed within the limitation period in both the appeals are upheld for the same reason as indicated herein above.
7. As regards the penalties, we find that the issue involved in this case is question of interpretation and the interpretation could have been due to the confusion arising whether the amounts are chargeable to tax under specific heading under business auxiliary service or otherwise. Since the issue involved is of interpretation, we hold that penalties imposed by the lower authorities are unwarranted. Accordingly, the penalties are set aside.
8. The appeals are disposed off as indicated herein above.
(Operative Part of the Order Pronounced in Court) (C J Mathew) Member (Technical) (M V Ravindran) Member (Judicial) */as 11 11