TMI Blog2018 (8) TMI 2055X X X X Extracts X X X X X X X X Extracts X X X X ..... NO. 53621/2018 - Dated:- 21-8-2018 - HON BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) AND HON BLE MR.C.L. MAHAR, MEMBER (TECHNICAL) Ms. Surbhi Sinha, Advocate for the appellant Shri Vivek Pandey A.R. for the Respondent ORDER ANIL CHOUDHARY: That the present appeal has been filed against the order in original no o3/GB/ST/2015 dated 30.03.2015. 2. Brief facts of the case are that the appellants are engaged in the business of freight forwarding, clearing and forwarding and other allied activities. The appellants book various containers and air cargo with various shipping lines or airlines for their customers and are recovering other miscellaneous charges . 3. The appellants provide or sell cargo space to customers who are importers/exporters of goods. The appellants pay charges for space booking to different shipping lines/airlines, and later on sell such space to the exporters/importers at slightly higher amounts. The difference between the amounts paid by the appellants to the shipping lines/airlines and the amounts recovered by the appellants from their customers (exporters/importers), is called the mark-up . The department was of the view that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. He further stated that, it is the responsibility of the appellant to transport customers goods to a foreign destination as per the terms of the contract between the appellants and their customers. In case of any damage to the goods or default in delivery, it is the appellants who are responsible to their customers and not the shipping lines. In fact the appellants customers (mainly exporters) do not interact with the shipping lines at all. Effectively, therefore, the appellants step into the shoes of the shipping lines. In other words, the services provided by the appellants is that of transportation of goods by sea. The appellants clients record these payments in their accounts as towards transportation charges. As per service tax law transportation of goods by sea to a foreign destination, was never a taxable service, both before and after 01.07.2012. 8. The impugned Order in Original does not discuss at all as to how selling of space by the appellants will fall in the category of Support Services of Business or Commerce as defined in Section 65(104c) of the Finance Act,1994. It is submitted that support services are in the nature of outsourced services. The same ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g commission was correct as the appellant was also separately in receipt of commission from shipping lines for slots that were booked on ships according to instructions from exporters. Convinced of this, and further taking note of the accounting entries at various stages before booking it as profit, the original authority recorded the inference that the appellant had carried out activities that were intended to promote the marketing of the services of the client which was taxable as business auxiliary service . Consequently, it was held that surplus of ₹ 21,95,34,602/- was liable to tax. 5. We have heard both sides and given due consideration to various submissions canvassed on behalf of the disputants. Learned Counsel for appellant contends that this amount is a profit from trading, that Finance Act, 1994 taxes certain services and not profits, that this purchase and sale is in relation to international trade transactions, that the taxable service in Section 65(105)(zzb) of Finance Act, 1994 are those rendered for or to a client, that client has not been defined in the statute, that they do not receive payment from shipping lines, that they are not agents but intermediar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Parliament under the residuary entry, i.e. Entry 97 of List I of the Seventh Schedule of the Constitution of India. It is an indirect tax and is to be paid on all the services notified by the Union Government for the said purpose. The said tax is on the service and not the service provider. and, though in the context of dispute relating to mandap keeper , the judgment is particularly relevant here as it goes on to observe after drawing attention to Section 68 and Section 65 of Finance Act, 1994 that. 12. A conjoint reading of the above provisions of the law goes to show that the services provided to a client, , falls under the category of taxable service 9. The description of the taxable service in Section 65(105) of Finance Act, 1994 as well as the definition, if any, of the terms therein are the primary determinant for taxation of any service. From the observation of the Hon ble High Court of Gujarat supra, it is clear that the provision of service is manifest by the existence of service provider performing an activity for which consideration is received from the recipient of the service. A finding on these aspects is distinctly absent in the impugned order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of shippers, contract for space or slots in vessels in anticipation of demand and as a distinct business activity. Such a contract forecloses the allotment of such space by the shipping line or steamer agent with the risk of non-usage of the procured space devolving on the appellant. By no stretch is this assumption of risk within the scope of agency function. Ergo, it is nothing but a principal-to-principal transaction and the freight charges are consideration for space procured from shipping line. Correspondingly, allotment of procured space to shippers at negotiated rates within the total consideration in a multi-modal transportation contract with a consignor is another distinct principal-to-principal transaction. We, therefore, find that freight is paid to the shipping line and freight is collected from client-shippers in two independent transactions. 13. The notional surplus earned thereby arises from purchase and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) of Finance Act, 1994 will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overed by tax liability under BAS. Further, examining the issue the original authority viewed that commission amount is necessarily to be obtained out of transaction which is to be provided by the respondent on behalf of the client, that is, the exporters. The facts of the case indicated that the mark-up value collected by the respondent from the exporter is an element of profit in the transaction. The respondent when acting as agent on behalf of airlines/shipping lines was discharging service tax w.e.f. 10-9-2004. However, with reference to amount collected from exporters/shippers the original authority clearly recorded that it is not the case that this amount is a commission earned by the respondent while acting on behalf of the exporter and said mark-up value is of freight charges and are not to be considered as commission. Based on these findings the demand was dropped. We do not find any impropriety in the said finding. The grounds of appeal did not bring any contrary evidence to change such findings. Accordingly, we find no merit in the appeal by Revenue. The appeal is dismissed. 16. Therefore, in light of the above precedent judgments of the Tribunal, the appeal is allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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