United India Shipping Services Vs Commissioner of GST and Central Excise (CESTAT Chennai)
In a recent case, United India Shipping Services v. Commissioner of GST and Central Excise [Service Tax Appeal no. 42191 of 2015 dated June 12, 2023], the CESTAT, Chennai made a significant ruling. The court overturned the order that had previously confirmed the demand on expenses such as deconsolidation charges, transportation charges, and DO charges. These expenses were initially collected by the assessee from their clients and then paid to the service provider. The CESTAT, Chennai based its decision on the grounds that the assessee had provided these services as a pure agent. Consequently, they were deemed not liable to pay service tax.
Facts
M/s United India Shipping Services (“the Appellant”) is a Custom House Agent.
During the course of audit, the Revenue Department noticed that the Appellant apart from collecting charges for providing Custom House Agent (“CHA”) services also collects LCL charges, deconsolidation charges, transportation charges, DO charges, terminal handling charges, demurrage charges, documentation charges and other charges from the clients.
The Appellant had excluded such charges while computing the total taxable value and had not discharged service tax on such charges on the claim that these are only reimbursable expenditure.
The Revenue Department was of the view that the Appellant ought to have included such expenses in the taxable value to discharge service tax liability.
Thereafter, a show cause notice dated October 14, 2009 (“the SCN”) was issued demanding service tax and penalty on such expenses incurred by the Appellant for providing CHA services. Later, the Adjudicating Authority confirmed the demand along with interest and imposed penalty on the Appellant.
Aggrieved thereby, the Appellant filed an appeal before Commissioner of Service Tax (Appeals-I) who upheld the order of the Adjudicating Authority vide Order-in-Appeal No.132/2015 (STA-I) dated July 27, 2015 (“the Impugned Order”).
Aggrieved by the Impugned Order the Appellant filed an appeal before the CESTAT.
The Appellant submitted that the tax has not been charged upon the reimbursed charges since, the debit notes were issued to clients for claiming reimbursement of such expenses.
Issue:
Whether the Appellant is required to pay service tax on transportation charges, terminal handling charges, documentation charges which is paid by the Appellant on behalf of client to the service provider?
Held:
The CESTAT, Chennai in Service Tax Appeal No.42191 of 2015 ruled as under:
