TMI Blog2012 (12) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... cargo or between the buyers and sellers of the ship. A ship broker bring together a ship owner who wants employment/fixture for his ship located at a particular Port and ship charterer who requires a particular type of ship at or around a particular Port to transport some cargo. They help in negotiating the terms of the charter and finalisation of charter-party agreement and also assist both the parties in compliance of the charter - party terms and full and final settlement of all the dues and claims. The ship broker also acts as an intermediary for bringing together a ship owner who wants to sell his ship and the prospective buyer and assisting in sale of the ship. The essential ingredient of a 'Commission agents' service is acting on behalf of a principal which is missing is the case of the appellants. From the nature of their activity it is clear that brokers are purely intermediaries who do not act on behalf of either ship owner or the charterer and, therefore, they cannot be said to be commission agents & not covered by the definition of 'Business Auxiliary Service" - in favour of assessee. - Service Tax Appeal No. 145, 146, 545, 546 of 2011 - FINAL ORDER NO. ST/A/694-697/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners or charterer is located outside India or both are located outside India and payment is received in foreign currency, the service provided shall be treatable as service export and will not be taxable, according to the department, except for the case when both the ship owner and charter are located outside India and payment is received in foreign currency, in all other cases the appellant's service shall be taxable. 1.3 The other major point of dispute is regarding limitation - whether longer limitation period of five years under proviso to Section 73 (1) of the Finance Act, 1994 would be available to the Department. According to the department, the appellants are guilty of suppressing relevant information from the Department and hence the longer limitation period under proviso to Section 73 (1) ibid would be available to it. 1.4 On the above basis, the following show cause notices were issued to the appellants for recovery of allegedly non-paid service tax alongwith education cess and interest thereon under Section 75 of the Finance Act, 1994 and also proposing imposition of penalty on the appellants under Section 77 and 78 of the Finance Act, 1994. Sl.No . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d allowed the abatement of the service tax for determining the assessable value. 1.6 Against the above orders of the Commissioner, the appellants - M/s Inter Ocean Shipping (India) Pvt. Ltd. and M/s Inter Ocean Shipping have filed appeals No. ST/545/2011 and No. ST/546/2011 respectively. 1.7 The department has filed review appeals Ho. ST/145/11 and ST/146/11 against the above orders of the Commissioner challenging the portion of the Commissioner's order treating the amount received by the appellant as cum tax and permitting abatement of service tax for determining the assessable value. 2. The matter was heard on 16/2/2012 and thereafter on 20/09/2012 again for seeking clarification on certain points. 3. Shri P.K . Sahu , the learned Counsel for the appellant, pleaded that the appellants as ship brokers, act as middlemen between the vessel owner and a charterer and in this capacity they neither represent the vessel owner nor the charterer nor act on their behalf, that the Department seeks to classify the appellant's service as "Business Auxiliary Service" only on the basis that their activity is akin to that of commission agent, that in terms of definition of 'commission age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e either charterer or the ship owner was located outside India and the payments from them had been received in foreign exchange, that under the Finance Act, 1994, the service recipient is a person who is responsible for payment of consideration, that when the service recipient is located outside India, and the appellants based in India have provided the service, and the payment has been received is foreign exchange, the service provided by the appellants has been exported and hence in any case, no service tax can be charged on the amount received in foreign currency from service recipient located abroad, that the Department was aware of the alleged taxable activities of the appellants since 14/9/07 when the audit of their business was conducted and hence suppression of facts cannot be alleged and neither longer limitation period would be applicable nor penalty under Section 78 of Finance Act, 1994 would be attracted and that in view of this, the impugned orders are not sustainable. As regards the Revenue's appeals, appellants pleaded that when the service tax demands are not sustainable, there is no point in going into the dispute over the question of valuation of services raised i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship charter and finalising the charterer party agreement and its execution without any dispute, the nature of their activities as ship brokers are totally different from the activities of a 'commission agent' and, hence, they are not covered by the definition of 'Business Auxiliary Service'. 8. 'Business Auxiliary Service' became taxable w.e.f . 1/7/03. The definition of this service, as given in Section 65 (19) and which has been amended from time to time during the period of dispute is as under. 8.1 Definition during period from 1/7/03 to 9/9/ 04 ;- "Business auxiliary service" means any service in relation to :- ( i ) promotion or marketing or sale of goods produced or provided by or belonging to the client ; or (ii) promotion or marketing of service provided by the client ; or (iii) any customer care service provided on behalf of the client ; or (iv) any incidental or auxiliary support service such as billing, collection or recovery of cheques , accounts and remittance, evaluation of prospective customer and public relation services, and includes services as a commission agent, but does not include any information technology service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client ; (v) production or processing of goods for, or on behalf of, the client; (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses ( i ) to (vi), such as billing, issue or collection or recovery of cheques , payments, maintenance of accounts remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any information technology service and any activity that amounts to "manufacture" within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 (1 of 1944). Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause - (a) " commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person - (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us special stipulations, which might be of particular concern to the owner, may have to be inserted in a concluded contract relating to such property. The parties, therefore do not ordinarily contemplate that the agent should have the authority to complete the transaction in such cases. That is why it has been held, both in England and in India, that authority given to a broker to negotiate a sale and find a purchaser, without furnishing him with all the terms, means "to find a man willing to become a purchaser and not to find him and make him a purchaser". See Rosenbaum v. Belson , (1900) 2 Ch. 167 : (69 L.Z . Ch. 569) and Durga Charan v. Rajendra Narayan, 36 C.L . 3. 467 [ A.I.R . (10) 1913 Cal. 57] . The general rule of law, as to commissions, undoubtedly is, that the whole service or duty must be performed, before the right to any commissions attaches, either ordinary or extraordinary; for an agent must complete the thing required of him, before he is entitled to charge for it. In the case of brokers employed to sell real estate, it is well settled that they are entitled to their commission when they have found a purchaser, even though the negotiations are conducted and conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintain database of ship owners, the class of ships owned by them and their location. It is not the case of the Department that the appellants have agreements with shipping companies etc. for representing them in negotiations. The essential ingredient of a 'Commission agents' service is acting on behalf of a principal which is missing is the case of the appellants. From the nature of their activity it is clear that brokers are purely intermediaries who do not act on behalf of either ship owner or the charterer and, therefore, they cannot be said to be commission agents. 11. In the case of Commissioner of Sales Tax, MP, Vs. Pondurang Tukaram Dalal , decided by Hon'ble High Court at Nagpur vide judgment reported in AIR 1957 Nagpur 61 ( V44 C 19 Mar.) , the respondent was giving the facility of displaying their goods to weavers in his shop, where the prospective buyers of the fabrics brought by the weavers, could come and examine the same. The price of the goods was negotiated between the buyers and the weavers through the respondent. On the price being settled between a buyer and the weaver, the weaver used leave his goods in the respondent's shop and get the price from the respond ..... 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