Shipping Corporation of India Ltd Vs Commissioner of Central Excise & Service Tax (CESTAT Mumbai)
Proposals in the show cause notice (SCN) should necessarily be founded on the letter of law and, not on external sources
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Mumbai set aside a tax demand of ₹3.58 crore against Shipping Corporation of India Ltd (SCI) for ‘business auxiliary service’ and ‘taxable service’ provided between October 2009 and September 2014. The case arose after an audit found that SCI had not paid service tax on ‘trade commission’ retained while chartering vessels for oil companies. The tax department contended that the retained amount qualified as ‘commission’ for acting as an agent and was taxable under Section 65(105)(zzb) of the Finance Act, 1994, until June 2012, and under Section 66B thereafter. However, SCI argued that the amount was a trade discount and not taxable.
The tribunal criticized the reliance on external sources such as dictionaries and Investopedia to define taxable terms, emphasizing that show cause notices must be based strictly on statutory provisions. It found that the adjudicating authority had not sufficiently examined SCI’s contractual obligations with vessel owners and oil companies to establish a tax liability. SCI cited judicial precedents, including Coromandel Fertilisers Ltd v. Union of India (1984) and Hindustan Gas & Industries Ltd v. Collector of Central Excise (1991), to argue that mere terminology in financial records does not determine taxability.
