Taxability of Ocean Freight Charges under Service Tax

[CA Bimal Jain]

The CESTAT, Chennai in M/S. GEODIS OVERSEAS PRIVATE LIMITED VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI - 2022 (6) TMI 1085 - CESTAT CHENNAI set aside the order of the Revenue Department demanding the service tax on Ocean Freight Charges (“OFC”).

Facts:

M/s. Geodis Overseas Private Limited (“the Appellant”) is a freight forwarder and is engaged in freight forwarding of import and export shipment of goods. The Appellant is providing various services and collects charges in the nature of Bill of Lading fee, handling charges, etc., from their customers and paid the same to the shipping companies. Hence, there is no service tax liability on a collection of OFC.

The Appellant has filed this appeal challenging the Show Cause Notice (“SCN”) followed by the Order-in-Original (“the Impugned Order”) issued to the Appellant demanding the service tax liability along with the interest and penalty on the collection of OFC from their customers.

Being aggrieved by the Impugned Order, the present appeal has been filed.

Argument by the Department or the Respondent:

The Revenue Department (“the Respondent”) alleged that the Appellant, who is a Special Economic Zone (“SEZ”) unit, is not eligible for a refund as per the SEZ Exemption Notification in respect of the input services for the reason that the services are not physically consumed within the SEZ unit.

The Respondent contended that the Appellant have to pay the Service Tax on the OFC collected by them as, these fall under the head “Business Support Service”.

Argument by the Appellant:

The Appellant contended that as per Section 67 of the Finance Act, 1994 (“the Finance Act”) the value of taxable service shall be the gross amount for providing such service.

The Appellant submitted that they made the payment to the shipping companies for transportation of cargo of its clients and recover the same from its clients. Therefore, OFC does not form part of the value of taxable service rendered by the Appellant.

Issue:

Whether the charges collected by the Appellant from its customers are in the nature of OFC and subject to levy of Service Tax under Business Support Service?

Held:

The CESTAT, Chennai in M/S. GEODIS OVERSEAS PRIVATE LIMITED VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI - 2022 (6) TMI 1085 - CESTAT CHENNAI, held as under:

• Observed that, the aforementioned issue has been considered in various decisions of the Tribunal wherein the Tribunal has held that OFC is not subject to levy of service tax under Business Support Services. The relevant decision has been given in the case of the case of “M/s. Greenwich Meridian Logistics (I) Pvt Ltd”.
• Held that, the Appellant is not liable for service tax on OFC.
• Set aside Impugned Order.

(Author can be reached at info@a2ztaxcorp.com)