Custom, Excise & Service Tax Tribunal
M/S. La Freight Pvt. Ltd vs Commissioner Of Service Tax, Chennai on 26 February, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal Nos. ST/507 to 510 /2010
(Arising out of Order-in-Original Nos. 20 to 23/2010 dated 26.2.2010 passed by the Commissioner of Service Tax, Chennai)
M/s. La Freight Pvt. Ltd. Appellant
Vs.
Commissioner of Service Tax, Chennai Respondent
Appearance Shri D.Arvind and Shri Adhitya Srinivasan, Consultants for the Appellant Shri K. Veerabhadra Reddy, JC (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing / Decision: 26.02.2018 Final Order Nos. 40464-40467 / 2018 Per Bench Brief facts are that the appellants are IATA approved Freight Forwarding Agent. They are registered with the Service Tax Department under Custom House Agent Service and Business Auxiliary Service. On intelligence that appellants are not paying service tax on various charges like brokerage, discount, commission, incentive etc. investigations were conducted which culminated into issuance of show cause notice dated 11.6.2007. After adjudication the original confirmed the demand of service tax along with interest and also imposed penalties under Sections 76 and 78 of the Finance Act, 1994. Aggrieved the appellants are now before the Tribunal.
2. On behalf of the appellant, ld. Consultants Shri D.Arvind assisted by Shri Adhitya Srinivasan argued the matter. It is submitted that the appellant is discharging service tax on the commission paid to them by airlines for booking cargo space. In terms of the tripartite agreement entered into between Airlines, IATA and the Cargo agent, the appellant accepts the cargo from the exporters / clients on behalf of the airlines for transportation. The airlines provide bulk airway bills to cargo agents. The appellant as cargo agent books the cargo, prepared airway bills and issue the same to the exporters / clients on behalf of the airlines. The airway bill contains various details such as name of the shipper, name of the IATA agent, destination airport, total freight charges etc. The airlines pay agents commission, overriding commission, market price adjustment, discount or incentive to the appellants. The commission / incentive / rebate received by the appellant from airlines cannot be subject to levy of service tax for the reason that these are nothing but freight margin recovered from exporters for the service rendered to exporters in the capacity of a principal i.e. carrier. Thus, the appellant issues their own transport documents and is liable to pay airlines / shipping lines regardless of recovery from customer and is responsible for safe and timely transportation of cargo of the customers. It is submitted by ld. consultant that the issue is no more res integra and is conclusively decided by the following decisions:-
a. Bax Global India Ltd. Vs. Commissioner of Central Excise, Chennai Final Order No. 42113/2017 dated 18.9.2017 b. Skylift Cargo Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai Final Order Nos. 42242 to 42244/2017 dated 20.9.2017 c. DHL Lemuir Logistics Pvt. Ltd. Vs. Commissioner of Central Excise, Thane I 2016-TIOL-1455-CESTAT-MUM
3. Ld. AR Shri K. Veerabhadra Reddy reiterated the findings in the impugned order. He submitted that in the earlier round of litigation, the Tribunal had remanded the matter and thereafter the Commissioner has passed the impugned order, wherein the demand has been confirmed. In the show cause notice, the demand of service tax was made on the entire amount received from airlines whereas after denovo adjudication only that part of the amount collected from the exporters has been subjected to levy of service tax. He argued that the facts in the case of Skylift Cargo (supra) as well as other decisions relied by the consultant are entirely different from the facts in the present case. He submitted that the appellant has discharged service tax under BAS in respect of commission received from the airlines treating the airlines as service recipient. When they adopt the airlines to be a service recipient, in respect of commission amount, the same is equally applicable to all the activities connected with cargo booking. Thus, the argument of the appellant that the airlines is not their customer for the rebate / incentive received for cargo booking cannot be accepted.
4. Heard both sides.
5. The issue is whether the appellants are liable to pay service tax on the rebate / incentive received from exporters / clients for booking space for cargo. The very same issue was analyzed by the Tribunal in the case of Skylift Cargo (supra). Though the ld. AR argued that the facts are different, on perusal, we are convinced that the facts and the issue in these cases are identical. For better appreciation, the discussion of facts in the case of Skylift Cargo (supra) is detailed as under:-
2. The facts of the case are that assessee M/s. Skylift Cargo (P) Ltd., [hereinafter referred to as assessee] are engaged in providing Cargo Handling Service, Clearing & Forwarding Service, Customs House Agent Service. They are also involved in the activities of booking domestic and international air cargo for various airlines for rendering the said bookings. Department took the view that the assessee were paying service tax under Business Auxiliary Service only on the commission amount without considering the incentive amount. Accordingly, proceedings were initiated against the assessee by way of issue of show-cause notices. These proceedings culminated in confirmation of demands of differential service tax liability of Rs.19,98,332/- and Rs.93,11,332/- respectively with interest liability thereon. Penalties, which were upheld by the impugned orders in respect of appeal nos.ST/00026/2008 and ST/20005/2009. Aggrieved, assessees are before this forum.
3. When the matter came up for hearing learned consultant Shri D. Aravind made oral and written submissions, which can be summarised as follows:-
(a) During the course of freight forwarding, the assessee book cargo space in airlines. Once the space is booked, the assessee receives 5% commission from airlines for issuing Airway Bill and other connected documents on behalf of airlines and making cargo ready for carriage. On this, service tax is being paid. This 5% commission is uniform by virtue of a tripartite agreement between all airlines, IATA and the Freight Forwarders and hence, there is no need for assessee to promote any particular airline unlike, a GSA.
(b) The space so booked in airlines at a particular rate is allotted to single or multiple customers or in multiple consignments to single customer for a profit.
(c) This freight difference (difference between price at which it is booked with airlines and the price at which it is offered to customers) is accounted as Incentive, Discount, Overriding Commission, Market Price Adjustment etc., depending upon the terminology used by the airlines. This is evident from the CA Certificate and the subsequent period notices.
(d) While the department stand is that this freight difference is earned on account of promoting an airline, whereas, there is no payout by the airlines to the assessee. On the other hand, the assessee recovers full freight from the exporters and the difference between the purchase and sale price is retained by the assessee.
(e) The assessee issues House Airway Bills to their customers based on which the transportation takes place and, therefore, act in the capacity of a transporter/principal, rendering service to exporters.
(f) Freight Forwarder rendering service as a principal has been recognised by CBEC in Education Guide as well as in their Circular of August 2016.
(g) The matter is no longer res integra and have been held in their favour, vide a number of decisions, namely:-
(i) Commissioner of Service Tax, New Delhi Vs M/s. Karam Freight Movers reported in 2017 (4) G.S.T.L.215 (Tri.Del.).
(ii) DHL Lemuir Logistics Pvt. Ltd. Vs Commissioner of Central Excise, Thane-1 reported in 2016-TIOL-1455-CESTAT-MUM.
(iii) Phoenix International Freight Services Pvt. Ltd. Vs Commissioner of Service Tax, Mumbai-II reported in 2016-TIOL-2353-CESTAT-MUM.
(iv) Greenwich Meredian Logistics (India) Pvt. Ltd. Vs Commissioner of Service Tax, Mumbai reported in 2016-TIOL-869-CESTAT-MUM.
(h) In respect of subsequent periods, department themselves have taken a different stand on the issue and have sought to demand service tax liability on the allegation that they are providing Business Auxiliary service to the exporters. Demand of service tax has been made on the very difference only. In respect of the very same issue on which appeal has been filed, for number of subsequent show-cause notices, the matter has been decided in their favour by the Commissioner (Appeals). In fact, in one of such cases, the department is in appeal no.ST/41474/2013. (i) What has been termed as an incentive is nothing but freight difference, the fact of which has been certified by the CA certificate. The subsequent notices issued by the department also vindicate this stand.
6. The Tribunal after considering the facts as well as issue in detail, has set aside the demand applying decisions in the case of Greenwich Meridian Logistics (India) Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai 2016 (43) STR 215 and Suraj Forwarders Vs. Commissioner of Service Tax 2016 (42) STR 843. We do not find any ground to take a different view. The demands therefore cannot sustain and requires to be set aside which we hereby do.
7. In the result, the appeals are allowed with consequential relief, if any.
(Operative portion of the order was
pronounced in open court)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
Rex
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