Tiger Logistics India Ltd Vs Commissioner of Central Tax (CESTAT Delhi)
CESTAT Delhi held that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions would not be leviable to service tax.
Facts- Service tax appeal has been filed by M/s. Tiger Logistics (India) Ltd to assail that part of the order passed by the Commissioner Adjudication, Central Tax, GST, East that confirms the demand of service tax amounting to Rs. 5,65,06,546/- with interest u/s. 75 of the Finance Act, 1994 and penalty u/s. 78(1), 77(1)(a), 77(2) and 70 of the Finance Act.
The appellant is engaged in providing the Customs clearance of cargo on behalf of the clients; along with customs clearance, transportation service as an incidental service to the clients; and Freight forwarding.
The actual amount of freight paid by the appellant to the airlines or shipping lines may be more or less than the amount of freight agreed to with the customer; the differential being the profit or loss accruing to the appellant from the sale of cargo space. The appellant claims to act on a principal-to-principal basis with their clients for rendering this service.
The issue involved in this appeal is regarding demand of service tax on the Mark Up/Differential Ocean Freight, Container Detention Charges, Toll Tax, Brokerage, Forklift Charges, Fumigation Charges and Sundry Charges.
The order dated 18.11.2021 passed by the Commissioner adjudicates the Statement of Demand dated 22.12.2017 as also the Statement of Demand dated 29.09.2020. The former Statement of Demand proposed a demand of Rs. 2,48,97,489/- for the taxable services rendered by the appellant during the period 01.03.2015 to 31.03.2017 after mentioning that the legal provisions regarding the issues had been discussed in detail in the show cause notice dated 23.04.2015 issued by the Principal Commissioner. The latter Statement of Demand proposed a demand of service tax amounting to Rs. 3,16,09,047/- for the taxable services rendered by the appellant for the period 01.04.2017 to 30.06.2017. This Statement of Demand also mentioned that the legal provisions on the issues had been discussed in detail in the earlier show cause notice dated 23.04.2015 issued by the Principal Commissioner.
Conclusion- The Division Bench in Marinetrans India Pvt. Ltd. vs. CST held that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions would not be leviable to service tax.
Accordingly, the demand of service tax on mark up on ocean freight, container detention charges and toll taxes. Further, penalty u/s 78 of the Finance Act is set aside as suppression is not proved.
FULL TEXT OF THE CESTAT DELHI ORDER
Service Tax Appeal No. 52405 of 2022 has been filed by M/s. Tiger Logistics (India) Ltd.1 to assail that part of the order dated 18.11.2021 passed by the Commissioner Adjudication, Central Tax, GST, East2 that confirms the demand of service tax amounting to Rs. 5,65,06,546/- with interest under section 75 of the Finance Act, 19943 and penalty under section 78(1), 77(1)(a), 77(2) and 70 of the Finance Act.
2. Service Tax Appeal No. 52621 of 2022 has been filed by the Commissioner Central Goods and Service Tax (CGST)4 claiming the following relieves in regard to the aforesaid order dated 18.11.2021 passed by the Commissioner:
“A. Whether the Order-in-Original No. 41-42/Commr/Delhi East/AP/2021 dated 18.11.2021 passed by the Commissioner, CX & GST, Delhi East in the case of M/s Tiger Logistics (India) Limited [earlier known as Tiger Logistics (India) Private Limited], 804-A-807, 8th floor, 60, Skylark Building, Nehru Place, New Delhi-110019, was legally correct & proper to the extent of:
(i) Imposition of penalty under Section 78(1) of the Finance Act, 1994 which was not proposed in any of the Show Cause Notices.
(ii) Non-imposition of penalty under Section 76 of the Finance Act, 1994 which was proposed in both the Show Cause Notices.
B. Whether by an order passed under sub-Section (7) of Section 86 of the Finance Act, 1994 the Hon’ble Tribunal should modify the aforesaid order; and
C. Any other order as may be deemed fit and proper by the Hon’ble CESTAT, under the circumstances of the case, in furtherance of the objectives of judicial discipline and serving the principles of natural justice.”
3. Service Tax Appeal No. 52622 of 2022 has been filed by the department with regard to the order dated 18.11.2021 passed by the Commissioner claiming the following claims:
“A. Whether the Order-in-Original No. 41-42/Commr/Delhi East/AP/2021 dated 18.11.2021 passed by the Commissioner, CX & GST, Delhi East in the case of M/s Tiger Logistics (India) Limited [earlier known as Tiger Logistics (India) Private Limited], 804-A-807, 8th floor, 60, Skylark Building, Nehru Place, New Delhi-110019, was legally correct & proper to the extent of:
(i) Imposition of penalty under Section 78(1) of the Finance Act, 1994 which was not proposed in any of the Show Cause Notices.
(ii) Non-imposition of penalty under Section 76 of the Finance Act, 1994 which was proposed in both the Show Cause Notices.
B. Whether by an order passed under sub-Section (7) of Section 86 of the Finance Act, 1994 the Hon’ble Tribunal should modify the aforesaid order; and
C. Any other order as may be deemed fit and proper by the Hon’ble CESTAT, under the circumstances of the case, in furtherance of the objectives of judicial discipline and serving the principles of natural justice.”
4. The appellant claims to be engaged in providing the following services:-
(i) Customs clearance of cargo on behalf of the clients;
(ii) Along with customs clearance, the transportation service as an incidental service to the clients; and
(iii) Freight forwarding.
5. The actual amount of freight paid by the appellant to the airlines or shipping lines may be more or less than the amount of freight agreed to with the customer; the differential being the profit or loss accruing to the appellant from the sale of cargo space. The appellant claims to act on a principal to principal basis with their clients for rendering this service.
6. The issue involved in this appeal is regarding demand of service tax on the Mark Up/Differential Ocean Freight, Container Detention Charges, Toll Tax, Brokerage, Forklift Charges, Fumigation Charges and Sundry Charges.
7. The order dated 18.11.2021 passed by the Commissioner adjudicates the Statement of Demand dated 22.12.2017 as also the Statement of Demand dated 29.09.2020. The former Statement of Demand proposed a demand of Rs. 2,48,97,489/- for the taxable services rendered by the appellant during the period 01.03.2015 to 31.03.2017 after mentioning that the legal provisions regarding the issues had been discussed in detail in the show cause notice dated 23.04.2015 issued by the Principal Commissioner. The latter Statement of Demand proposed a demand of service tax amounting to Rs. 3,16,09,047/- for the taxable services rendered by the appellant for the period 01.04.2017 to 30.06.2017. This Statement of Demand also mentioned that the legal provisions on the issues had been discussed in detail in the earlier show cause notice dated 23.04.2015 issued by the Principal Commissioner.
8. It would, therefore, be appropriate to refer to the show cause notice dated 23.04.2015 issued by the Principal Commissioner containing reasons for proposing service tax under various heads for the period October 2009 to February 2015. They are:
