Custom, Excise & Service Tax Tribunal
Molight Shipping Services P. Ltd vs Commissioner Of Central Excise on 15 September, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI Appeal No.ST/469/2009 [Arising out of Order-in-Appeal No.37/2009 (M-ST) dt. 27.07.2009 passed by the Commissioner of Central Excise (Appeals), Chennai] Molight Shipping Services P. Ltd. Appellant Versus Commissioner of Central Excise, Chennai Respondent
Appearance:
Shri G. Thangaraj, Consultant For the Appellant Shri B. Balamurugan, AC (AR) For the Respondent CORAM :
Honble Ms. Sulekha Beevi C.S. Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Date of hearing / decision : 15.09.2017 FINAL ORDER No. 42083 / 2017 Per B. Ravichandran Appellant is against order dt. 27.7.2009 of Commissioner (Appeals) Central Excise, Chennai.
2. The appellants are engaged in providing service as "Steamer Agent" to shipping lines and also other activities of arranging shipments for the clients. They are registered with service tax department for discharging service tax under the category of "Steamer Agent Service". The dispute in the present appeal relates to the period from1.10.2001 to 31.3.2006. The proceedings are with reference to non-payment of service tax on considerations which should form part of taxable value under the category of "Steamer Agent Service" and "Business Auxiliary Service". These are mainly relating to retained amount from the cargo owners after remitting the exact payable amount to the steamer agents; cheque issued to the customers for excess not encashed by them. Difference due to exchange rate and brokerage amount received by them from liners as well as other steamer agents. The lower authorities confirmed the service tax liability of Rs.11,95,142/- along with equal amount of penalty against the appellant.
3. The Ld. consultant though elaborately submitted on merits of the case with reference to each type of consideration now sought to be taxed, contested the demand on limitation also. The show cause notice in the present case dt. 19.4.2007 was issued covering the period 1.10.2001 to 31.3.2006.
4. On the merits of the case, Ld. consultant submitted that there are four categories of amounts namely, balance lying in customers' account for more than 2 years, rounded off/small amount lying customers' account, excess collection from the importers in respect of container damage charges, port charges, detention charges etc., cheques issued to the customers not encashed by them. All these amounts are not received as a consideration for any attributable taxable services. As per the accounting standard and the requirement in Income Tax law, the amount cannot be retained permanently in their accounts. Accordingly they reverse it and this is very clear from the details of accounts maintained by them.
5. Regarding a small amount of service tax demanded due to exchange rate fluctuation, ld. consultant submitted that as per the understanding with their client (liner), they will get percentage commission on dollar terms. However, there is one or two weeks difference in getting realization and during the period any fluctuation exchange rate will show in the quantum in rupee terms. This may be positive or negative depending on the fluctuation. Revenue only picked up the case where due to exchange rate fluctuation they have realized the amount in rupee terms on the higher side. They have not considered the amount which is realized lesser. Appellants have discharged service tax based on the date of billing and the exchange rate and the realization of amount later is not considered. This well known practice is being followed.
6. The Revenue also confirmed service tax liability on brokerage amount retained by them under the category of 'Steamer Agent Service'. Ld. consultant submitted that they have two types of brokerage. One is from the liners. The other one is from other steamer agents for helping them in getting cargo booking in other liners. The steamer agent service is taxable only in respect of service rendered to a liner. The service rendered to other steamer agents cannot be considered for tax liability under "Steamer Agents Service". If at all, it should be levied to tax under "Business Auxiliary Service" which in the present case is not invoked.
7. Ld. Consultant submitted that demand under Business Auxiliary Service was also raised in respect of amounts collected as document charges from various customers. These documentation charges are of a service directly rendered to various customers and cannot be taxed under BAS. The service is not one of promoting business of the client or rendering service on behalf of the client.
8. On the limitation, the ld. consultant submitted that they have been regularly filing ST-3 returns indicating all the details where returns were verified and signed by the jurisdictional Superintendent. In this regard, h produced copies of ST-3 returns verified by the Superintendent. When the assessment was completed by the jurisdictional officer after due verification of documents, suppression cannot be invoked in the present case.
9. The Ld. A.R supported the findings of the lower authorities. He submitted that appellant did not establish his claim with supporting details before the lower authorities. The excess amounts retained by the appellant are nothing but consideration for rendering services to the client. Since money is received and retained towards providing service, same is taxed.
10. Regarding brokerage, he submitted that appellant never gave details of break up of such brokerage service to liners or other steamer agents.
11. On limitation also, Ld. A.R supported the findings of the lower authorities.
12. We have heard both sides and perused the appeal records. Regarding four categories, "write back amount" as mentioned above, we note the Tribunal examined similar issue in DSP Merrill Lynch Ltd. Vs CST Mumbai 2016 (44) STR 436 (Tri.-Mumbai) and Grey Worldwide (I) Pvt. Ltd. Vs CST Mumbai 2015 (37) STR 597 (Tri.-Mumbai). The Tribunal held that amount of write backs are those which are yet to be claimed by the assessee. These amounts are payable to the client when the claims are lodged. Accordingly, they cannot be considered as consideration received towards services rendered.
13. Regarding exchange rate, we note that appellants are uniformly following the rate as per the date of accounting of receipt of brokerage / commission. The difference in exchange rate which is because of date of presentation of accounts for realization is not attributable to extra consideration. The same will work whether negative or positive side which is not considered for tax liability by the appellant. They calculate tax liability as per the date of brokerage, accounting, and we find no reason to infer infirmity in such action.
14. Regarding brokerage rate, appellant produced a certificate dt.9.3.2009 of a Chartered Accountant to indicate that such brokerage payment is on two different headings. It is received from shipping line and also from other steamer agents. The services rendered to shipping line are rightly taxable under "Steamer Agents Service". Appellant admits this legal position. However, their claim is in respect of services rendered to other steamer agents. The same is not liable to be taxed as 'Steamer Agent Service'. At best, it could be only "Business Auxiliary Service". We find the same can be only with reference to services rendered to a shipping line. The split up figures can be verified based on the documents submitted by the appellant and duty liability can be worked out on that basis.
15. Regarding documentation charges, we note that lower authority has confirmed the service tax liability under clause (vii) of Business Auxiliary Service. The said clause refers to a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing etc. On careful consideration of the entries in such clauses, we note that the service of documentation for which appellant collected charges cannot be fitted into any one of these categories. In this regard, we rely on the decision of the Tribunal in CMA CGM Global (India) Pvt. Ltd. Vs CCE Thane -2016 (41) STR 292 (Tri.-Mumbai). The Tribunal held that when the activities constitute services provided directly to a customer and do not constitute service provided on behalf of principal, the same cannot be taxed under BAS. In the present case, the residual clause has no application since it is not established that the said service is incidental to any of the services listed from clauses (i) to (vi) under BAS. We find no merit in the impugned order confirming tax liability under this heading.
16. Regarding limitation, we note that ST-3 returns were filed by the appellant were duly scrutinized and endorsed as "verified" by the jurisdictional Superintendent. This has been done from October 2002 onwards. Though Ld. A.R submitted that such verification does not mean that all the documents are considered. We note that jurisdictional officer has endorsed the ST-3 returns which can happen only on due satisfaction of verification of all documents and not on mere perusal of the returns. As such, we note that the demands for the extended period cannot be sustained in the present case. The demand should be restricted, wherever payable in terms of above discussion to the normal period effective from the date of show cause notice. In view of same reason, imposition of penalty is also not sustainable and is set aside.
The appeal is disposed in the above terms.
(dictated and pronounced in court)
(B. Ravichandran) (Sulekha Beevi C.S)
Member (Technical) Member (Judicial)
gs
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Appeal No.ST/469/2009