The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is payable on buying and selling of cargo space.
The bench of Binu Tamta (Judicial Member) and Rajeev Tandon (Technical Member) has observed that when the appellant is acting on a principal to principal basis, as regards purchase and selling of space from shipping line/airline and selling to importers/exporters we are of the view that the said act would not amount to an activity liable to Service Tax.
The appellant is registered with the Service Tax Commissionerate, Delhi for provisioning of ‘Business Support Service’. The appellants have been issued show cause notice dated 23.04.2016 in the matter seeking recovery for alleged non- payment of Service Tax on extra charges collected i.e. mark up for the freight income (ocean freight/air freight).
The period of dispute in the matter pertains to 2010-11 to 2014-15 and 1st April 2015 to 30th June 2017. The department vide the impugned show cause notice confirmed the demand of Service Tax for an amount of Rs.3,67,38,471/- along with interest besides imposing penalty of equal amount.
The show cause notice alleged that on perusal of the financial statements of the appellant, it was noticed that the major source of revenue are income from sea freight, air freight, commission for haulage, consultation income and income from customs clearance.
Upon verification of these invoices concerned, the department alleged that no Service Tax was paid by the appellant on the mark up collected by way of ocean freight (mark up – i.e. difference between the amount charged from the customers towards sea/air freight and the amount paid to the shipping line/airline).
The department therefore alleged that the said mark up was a consideration liable to Service Tax as the nature of service rendered by the appellant could not be considered as transportation of goods.
It is also the contention of the department that the transportation is actually rendered by the shipping lines/airlines to the exporters importers for which a consideration has been received by way of ocean/air freight charges, and that the Service Tax exemption pertains to transportation and is granted to the transporters.
The department inter alia alleged that for export/import of cargo in effect services of shipping lines/airlines are required to provide containers for export of cargo which services are however obtained by the exporters by way of agents/intermediaries.
It is a fact on record that the agents like the appellant are concerned with booking of container/cargo space/cargo with the shipping lines/airlines for export purposes and it is these containers/cargo space booked by such agents that are availed by the exporters for the purpose of export.
The tribunal relied on CBEC Circular No.17/07/2016-ST dated 12.08.2016 and clarified that a freight forwarder may act as principal and raise invoice to the exporter on his own account. In that case the freight forwarder is providing transportation of goods and is not acting as “intermediary”. The appellant is not liable to pay service tax, when the destination of the goods is a place outside India, as also flows from the said circular.
Case Details
Case Title: M/s. Seagull Maritime Agencies Pvt.Ltd. Versus Commissioner of Central Goods & Service Tax, Audit-II, New Delhi
Case No.: Service Tax Appeal No.51142 of 2019
Date: 12.12.2024
Counsel For Appellant: P.K.Sahu
Counsel For Respondent: Jaya Kumari
