Case Law Details
Progeon Global Forwarding Pvt. Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Chennai held that merely billing customers for booking of space does not make one a Freight Forwarder. Therefore, the appellant whose activity has failed to establish his credential as a Freight Forwarder is found to satisfy the classification of Business Support Service. Accordingly, demand sustained.
Facts- During the course of audit of accounts of the appellant, it was noticed by the department that in addition to providing ‘Business Auxiliary Service’ and ‘Business Support Service’, the appellant also arranges for the transportation of export and import cargo of their customers in containers by sea / air through the shipping lines / airlines. The appellant collected charges from their customers as Ocean Freight both in the case of imports and exports. On verification of invoices, it was noticed that the amount collected as ‘Ocean Freight charges’ by the appellant from their customers is more than the ocean freight charges paid to the shipping companies. Though the appellant bills their customers with various charges viz. freight charges, LCL charges, Delivery Order charges, documentation charges, BL fees, Terminal Handling charges etc. service tax is discharged by the appellant on all charges except freight charges.
Therefore, two Show Cause Notices were issued to the appellant proposing to recover the service tax of Rs.30,74,829/- and Rs.39,23,054/-. After due process of law, the respondent vide orders impugned has confirmed the demand of service tax along with appropriate interest and imposed penalties u/s. 78 of the Finance Act, 1994.
Conclusion- Merely billing customers for booking of space does not make one a Freight Forwarder. It is seen from the paras above that the appellant has not demonstrated that he acts in the capacity of a principal while booking space. His argument is that he is not a ‘pure agent’ as he charges a markup over and above the payment made for booking space with the shipping lines / airlines. The appellant whose activity has failed to establish his credential as a Freight Forwarder is found to satisfy the classification of Business Support Service. We approve of the same.
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