Star Freight Pvt Ltd Vs C.S.T.-Service Tax (CESTAT Ahmedabad)
CESTAT Ahmedabad held that since the issue involved is with regard to taxability of Ocean Freight and reimbursement of expense which is highly interpretational in nature. Further, in absence of suppression of facts or malafied intention, extended period of limitation is not invocable.
Facts- M/s. Star Freight Pvt. Ltd., the service provider is an IATA Agent and International Freight Forwarders working on commission/ brokerage basis. On scrutiny of documents recovered during the course of a search conducted at the premises of Mr. Jasvant B Shah, CHA, it was noticed by the department that service providers were collecting certain charges on which they were not paying service tax.
On the basis of scrutiny of documents and investigation, the service provider have provided the ledger heads/activities which have not been considered as taxable services by them. Statements of Mr. Samir J Shah, Director was also recorded. It appeared that said service provider while performing various activities supported the business of exporters, importers, CHAs etc. and had also earned commission or brokerage for booking space in aircrafts and shipping lines for their customers.
The service provider was issued show cause notice dated 21.04.2011 proposing service tax demand. Commissioner vide impugned order have dropped the demand of service tax of Rs. 6,52,58,141/-, however, upheld the service tax demand of Rs. 34,56,764. Hence, both Revenue and the assessee are in appeal.
Conclusion- In the case of Seamax Logistics Ltd. v. Commissioner of Central Excise and Service Tax, Tirunelveli it is held that no service tax is chargeable on the difference between the ocean freight collected from the clients and the ocean freight paid to the shipping lines.
In the present case broadly the issue involved is taxability of Ocean Freight and reimbursement expenses. On this issue much water has flown as after various conflicting decision the Hon’ble Supreme Court in the case of Intercontinental decided the matter in respect of the reimbursable expenses and also on the Ocean Freight the Hon’ble Gujarat High Court in SAL Steel Ltd has held that it is not taxable. Therefore, the issue involved herein is purely of interpretation of law about valuation and taxability of the service. It is also fact that the appellant have been submitting all the documents details to the department. In this fact no malafied intention can be alleged against the appellant.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
1. Both sides are in appeal against the impugned Order –In-Original No. STC/17-19/COMMR/AHD/2013 dated 31.03.2013. As both the appeals are arising out of a common order, therefore both the appeals are taken up for disposal by a common order.
1.2 The brief facts of the case are that M/s. Star Freight Pvt. Ltd., the service provider is an IATA Agent and International Freight Forwarders working on commission/ brokerage basis. On scrutiny of documents recovered during the course of a search conducted at the premises of Mr. Jasvant B Shah, CHA, it was noticed by the department that service providers were collecting certain charges on which they were not paying service tax. On the basis of scrutiny of documents and investigation, the service provider have provided the ledger heads/activities which have not been considered as taxable services by them. Statements of Mr. Samir J Shah, Director was also recorded. It appeared that said service provider while performing the various activities supported the business of exporters, importers, CHAs etc. and had also earned commission or brokerage for booking space in aircrafts and shipping lines for their customers. It thus appeared that the said service provider had provided “Business Auxiliary Service” as defined in Section 65(19) of the Finance Act, 1994 and had provided „support services of business or commerce‟ as defined in section 65(104c) of the Finance Act, 1994, which were taxable under the respective sub-sections of Section 65 of Finance Act, 1994. Regarding the valuation of taxable services, the provisions of Service Tax (Determination of Value) Rules, 2006 (Valuation Rules ) were invoked by the department and all the expenditure or costs treated as consideration for the taxable service provided was included in the value for the purpose of charging service tax. As a result, Service provider was issued show cause notice dated 21.04.2011 proposing service tax demand of Rs. 4,55,46,095/- for the period October 2005 to 2009-10. Two more notices dated 21.10.2011 and 22.10.2012 were also issued to the service provider, one for the period 2010-11 demanding service tax of Rs. 1,19,23,240/- and another for the period 2011-12 demanding service tax of Rs. 1,12,45,570/-. All the three show cause notices were adjudicated by the Learned Commissioner vide impugned order whereby she dropped the demand of service tax of Rs. 6,52,58,141/-, however, upheld the service tax demand of Rs. 34,56,764. Hence, both Revenue and the assessee are in appeal.
2. Learned Chartered Accountant Shri Nilesh Suchak for the appellant M/s Star Freight Pvt. Ltd. submits that the demand of Service tax of Rs. 34,56,764/- under the category of “Business Auxiliary Service” (BAS) and “Support Service of Business or Commerce” (BSS) confirmed on incentive charges, Ocean Freight, Air Freight, amount paid to Shipping Line, Customs Clearance Charges, Fumigation charges, Insurance Charges, Palletization Charges, Statutory Charges, Transportation, documentation charges , administrative charges. The impugned order has considered the profit of non-taxable activity as value of service based on whims and fancy without stating under which provisions of Finance Act, 1994 such profit can be taxed.
2.1. He further submits that incentive charges were received by the appellant for achieving business target and for profit share from overseas agent for handling of shipment. This activity is not taxable under business auxiliary Services He placed reliance on the following judgments:
