ATA Freight Line Private Limited Vs Commissioner of Central Excise And Service Tax (CESTAT Chandigarh)
The case revolves around ATA Freight Line’s agreement with a foreign entity, offering multi-modal logistics services via air, land, and ocean. The dispute arises from a show cause notice that questioned the taxability of various charges. The three main issues addressed by CESTAT are as follows:
i. Incentives/Commission: CESTAT ruled that the incentives/commissions received by ATA Freight Line for booking space with airlines/ship liners didn’t constitute taxable service, but rather a buying and selling of space.
ii. Ex-Works Services: CESTAT concluded that charges related to transporting goods from India to a foreign destination are a single work item exempted under Rule 10 of POPS rules.
iii. Destination Charges: The charges collected by ATA Freight Line for foreign port activities were deemed reimbursement, not subject to Service Tax liability.
Conclusion: The Hon’ble CESTAT’s verdict favored ATA Freight Line, stating that their incentives, ex-works charges, and destination charges are not liable for Service Tax. This case establishes crucial insights into the tax treatment of various logistics services, clarifying tax liability aspects for businesses operating in the sector.
Argued by Ld. Counsel Mahesh Raichandani
FULL TEXT OF THE JUDGMENT/ORDER OF CESTAT CHANDHIGARH
The appellants, M/s ATA Freight Line Private Limited, are duly registered with Service Tax; an Audit of the records of the appellant was conducted and it appeared that the appellants were engaged in the following transactions and that they did not pay appropriate Service Tax on the services rendered/availed:
(i) The appellants, under an Agreement with their principals i.e. ATA, USA provide services to them and receive services; they bifurcate the charges for ex-work services, handling charges and sea freight charges payable to each other; these services are in the nature of transportation of goods provided to the principals; the appellants were required to discharge Service Tax as the service is rendered in the country.
(ii) The appellants book space in the air/ sea crafts and sell the same to their prospective customers; the appellants receive certain commission from the air/ sea liners in respect of this activity; the appellants performed the activity falling under “Business Auxiliary Service”.
(iii) The appellant recovers certain charges, from the Indian exporters, concerning the expenditure, on Custom duty, delivery order charges, port handling etc., at the destination in foreign ports.
2. A show-cause notice dated 24.10.2019 was issued to the appellant seeking to recover Service Tax of Rs.2,80,26,749/- along with interest while seeking to impose penalties under Sections 76, 77 & 78 of the Finance Act, 1994; the said show-cause notice has been confirmed by the Commissioner (Audit), CGST vide OIO No.03/GST(Audit)GGM/ Commr./SC/2021 dated 20.12.2021. Hence, the present appeal.
3. Shri Mahesh Raichandani, learned Counsel appearing for the appellants submits that the appellant reserves space in carrier vessels or aircrafts for export of cargo; the appellant does not have contract with the carriers but reserves space on spot rates and books space on various vessels/ aircrafts; the container space booked by the appellant is at a discounted price; the discount is passed on to the appellants by the carriers/ airlines which is accounted by the appellant under the Head “ITA Commission and Incentive”; he submits that while they discharged Service Tax on the commission received, they do not pay Service Tax on the discount as it is not towards any service but an incentive earned in the purchase and sale of space. He submits that Department has erred in holding that the appellant was acting as an Agent of the airlines on the basis of the nomenclature used in the accounting. He submits that the issue is no longer res integra, as it is settled by larger bench of the Tribunal holding that there is no Service Tax on discounts, in Kafila Hospitality and Travels Pvt. Limited – 2021 (47) GSTL 140 (Tri. LB) and by Division Bench in Asveen Air Travels Pvt. Ltd.- 2022 (64) GSTL 551 (Tri. Chennai).
4. He submits that in the following cases, it was held that nomenclature or label given in the Agreement as advance is not is either decisive or immutable; exigibility to Service Tax depends on the nature of consideration received and not on how the assessee treated the monies received. He relies upon:
