Indian Kanoon - Search engine for Indian Law

R.BANUMATHI,J The above appeal is filed by the Assessee against the order passed by Customs, Excise and Service Tax Appellate Tribunal, Chennai (CESTAT) in Miscellaneous Order No.403892013 dated 04.02.2013, directing the Assessee to make pre-deposit of Rs.30 lakhs as against the service tax of Rs.1,38,23,529/- and penalty of Rs.1,38,23,529/-.

2. Assessee  M/s.Leaap International Private Limited, Chennai, a Proprietorship firm is engaged in providing Custom House Agent Service, Business Auxiliary Service and Business Support Service. Assessee is registered with Service Tax Commissionerate, Chennai and their Service Tax Registration Number is AAACL1251FST001. Assessee provide cargo space already booked by them in Airlines/Ship for their clients use for export of goods. Assessee pays charges for space bookings to the respective Airlines/Steamer Agents. Whenever consignment of their customers are sent using the space booked, Assessee charge their customers freight charges for the transportation of the goods by the respective Airlines/Steamer Agents. While charging their customers towards freight charges for the cargo booked, the Assessee is said to be collecting extra charges and collect the same from their clients. The services of the Assessee are classifiable under 'Business Auxiliary Service' under the category of procurement of goods or services which are inputs for clients introduced with effect from 10.09.2004. Consequently, the Assessee is liable to pay service tax on the extra charges collected on the Airlines/Steamer Agents, which according to the Revenue is the consideration received for rendering the above services and will form part of the value of taxable service and liable for service tax under Business Auxiliary Service.

16. To contend that ocean freight is not leviable to service tax, the learned Senior Counsel placed reliance upon (2010) 18 STR 348 [M/S.GUDWIN LOGISTICS V. COMMISSIONER OF CENTRAL EXCISE, VADODARA]. In the said decision, the service provider had taken out the registration under Custom House Agent under Section 65(35) read with Section 65(105)(h) of Finance Act and rendered services such as fumigation, loading and unloading, stuffing goods in containers, labour charges for stuffing, facilitating charges and also collected ocean freight. The department levied service tax under the clearing and forwarding charges under Custom House Agent taxable services. CESTAT held that the substantial portion of the collected amount relates to ocean freight which itself is not liable to service tax under the Custom House Agent. Hence, the issue as to whether the excess collection over and above the ocean freight was liable to service tax under the Business Auxiliary Service under Section 65(19)(iv) or not was not the issue in appeal in that case before the CESTAT. Therefore, such case is distinguishable on facts.

17. Learned Senior Counsel placed reliance upon (2010) 17 STR 266 [DHL LEMUIR LOGISTICS PVT. LTD. V. COMMISSIONER OF SERVICE TAX, BANGALORE] where the Tribunal held that Air/Sea Freight Rebate is a margin derived on principal to principal transaction and it is not for rendering Custom House Agent services. In the said case, the service provider was registered under Custom House Agent services (Section 65(35) read with Section 65(105)(h)) and it collected charges for collecting fees, Break Bulk fees, Profit share form origin, Unallocated income, Currency adjustment factor, Freight rebate, Airline commission and sea freight brokerage, Air freight incentives, Expenses reimbursement billing. The department sought to tax the same under the head of Custom House Agent as forming part of Clearing and Forwarding services. CESTAT held that activity under one category shall not be made liable to service tax under another category and held that activity relating to freight forwarding cannot be brought under Custom House Agent. In the said case also the question as to whether excess collection over and above the ocean freight was liable to service tax was not the issue.