Custom, Excise & Service Tax Tribunal
M/S. Indo Lloyd Freight Systems Pvt. Ltd vs Commissioner Of Service Tax, Chennai on 3 August, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
ST/382/2009
(Arising out of Order-in-Revision No. 33/2009 dated 24.3.2009 passed by the Commissioner of Service Tax, Chennai)
M/s. Indo Lloyd Freight Systems Pvt. Ltd. Appellant
Vs.
Commissioner of Service Tax, Chennai Respondent
Appearance Shri V.S. Manoj, Advocate for the Appellant Shri A. Cletus, Addl. Commissioner (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing / Decision: 03.08.2017 Final Order No. 41497 / 2017 Per Bench The appellants are Custom House Agent and are registered for such services with the department. On the basis of intelligence that they were collecting charges from various shipping liners @ 2% of the basic ocean freight, in the name of brokerage, and is not discharging service tax on such amount received. The officers of preventive unit visited the premises and recovered documents and recorded statements. Pursuant to this, a show cause notice was issued for the period 1999 2000 to 2003 2004 under the category of Steamer Agent Service demanding service tax to the tune of Rs.92,651/- along with interest and also proposing to impose penalty. After due process of law, the original authority dropped the proceedings. The department issued a show cause notice invoking section 84 of the Finance Act, 1994 proposing for revision of the order passed by the adjudicating authority and in such revisionary proceedings, the Commissioner confirmed the demand along with interest and imposed penalty of Rs.100,000/- under section 78 of the Finance Act. Being aggrieved, the appellants are now before this Tribunal.
2. On behalf of the appellant, learned counsel Shri V.S. Manoj explained the activity carried out by the appellant on which the department has now sought to demand service tax under the category of Steamer Agent Service. He submitted that appellant is a custom house agent and is discharging service tax under this category. Using their relations with the customer, they also book space for cargo with shipping lines for which they are paid only an incentive which is 2% of the basic ocean freight. He argued that there is no service provider and service recipient relationship between the appellant (CHA) and the shipping liner. Merely because the appellant arranges spaces with shipping liner, it cannot be construed that the appellant has acted as a steamer agent. Appellant has discharged service tax on the commission received as custom house agent and the brokerage or incentive received from the shipping liner cannot be considered as a commission since the appellant does not communicate with the shipping liner as a steamer agent. He submitted that steamer agent is exclusively appointed by the shipping liner for the services to be rendered and is also paid commission. The learned counsel relied upon the Board Circular dated 25.4.2003 which clarified that the secondary service providers are not taxable. He relied upon the following judgments:-
(a) Lee & Muir Head Pvt. Ltd. Vs. Commissioner of Service Tax, Bangalore 2009 (14) STR 348 (Tri. Bang.)
(b) St. John Freight Systems Ltd. Order-in-Appeal No. 275/2010 dated 20.7.2010
(c) Interocean Shipping Company Vs. Commissioner of Service Tax, Delhi 2012-TIOL-1824-CESTAT-DEL
(d) Leader Engg. Works Vs. Commissioner of Central Excise, Chandigarh 2006 (197) ELT 469 (SC)
(e) Kartar Rolling Mills Vs. Commissioner of Central Excise, New Delhi 2006 (197) ELT 151 (SC)
(f) Boving Fouress Ltd. Vs. Commissioner of Centr al Excise, Chennai 2006 (202) ELT 389 (SC)
(g) Robinson Air Services Vs. Commissioner of Central Excise, Chennai II Final Order No. 53632/2016 dated 16.9.2016
3. Learned AR Shri A. Cletus reiterated the findings in the revision order. He explained that there are merchant vessels as well as bulk cargo vessels. In the case of bulk cargo vessels, they require customers for filing up the space. In case of small exporters, the shipping liners would not be able to arrange or contact with such exporters and the shipping liners arrange various agents including steamer agents to canvass the business for transportation of cargo. As per the definition of steamer agent, in the Finance Act, any person who is engaged in such activity would be rendering the service of steamer agent so that the activity undertaken by the appellants would be covered by the definition of steamer agent service, even though they are registered under the category of custom house agent service.
4. We have heard the submissions made by both sides.
5. The issue has been sufficiently discussed in the case of Lee & Muir Head Pvt. Ltd. (supra) wherein the Tribunal in a similar situation as observed as under:-
8.4?As regards brokerage commission of 2% paid for booking of the export cargo, it is seen that the agents of shipping lines normally book the export cargo. The appellants actually get brokerage or commission for getting orders for the export of cargo. For this, they are getting commission of 1.75% to 2%. Even if this activity is considered as Business Auxiliary Services as they promote the taxable services of other person, it is seen that there is a Notification No. 13/2003 dated 20-6-2003 which gives exemption under Business Auxiliary Services for services rendered as commission agent. Moreover, Boards Circular dated 25-4-2003 clarifies that the secondary service providers are not taxable. In fact the appellants are secondary service providers for the shipping lines, so they would not be covered in view of the Boards circular. Therefore, we are of the view that the brokerage commission of 2% paid for booking of export cargo cannot be taxed under the category of Business Auxiliary Services.
6. It is also brought to our notice that the same adjudicating authority vide Order-in-Original No. 37/2009 (STV) dated 19.6.2009 in the case of St. Johns Freight Systems Ltd. had confirmed the demand of service tax under the category of steamer agent service and vide Order-in-Appeal No. 275/2010 dated 20.7.2010, the Commissioner (Appeals) set aside the demand. The department has not filed any appeal against such order and the order has attained finality. It is also seen that the activity of the appellant as a custom house agent is to provide services to importers/exporters and the disputed activity was only a facility arranged by them to their clients. The appellant has no obligation to arrange transport of cargo through a particular shipping liner. Therefore, the amount received cannot fall within the category of commission so as to be subjected to levy of service tax. Following the decision in the case of Lee & Muir Head Pvt. Ltd. (supra), we hold that the demand is unsustainable. The impugned order is set aside and the appeal is 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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