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TMI Blog2023 (8) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... s as Ocean Freight both in the case of imports and exports. On verification of invoices, it was noticed that the amount collected as 'Ocean Freight charges' by the appellant from their customers is more than the ocean freight charges paid to the shipping companies. Though the appellant bills their customers with various charges viz. freight charges, LCL charges, Delivery Order charges, documentation charges, BL fees, Terminal Handling charges etc. service tax is discharged by the appellant on all charges except freight charges. Therefore, two Show Cause Notices dated 18.9.2015 for the period April 2010 to March 2015 and 16.4.2018 for the period from April 2015 to June 2017 were issued to the appellant proposing to recover the service tax of Rs.30,74,829/- and Rs.39,23,054/- respectively along with appropriate interest and imposing equal penalty. After due process of law, the respondent vide orders impugned has confirmed the demand of service tax of Rs. 69,97,883/- (Rs.30,74,829/- + Rs.39,23,054/-) along with appropriate interest and imposed penalties under section 78 of the Finance Act, 1994. 3. No cross-objections were filed by the responden7t-department. 4. Shri S. Aditya the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Service Tax, Chennai - Final Order No. 42242 to 42243 of 2017 d. La Freight Vs. CCE & ST Final Order No. 40464 to 40467 of 2018 Under the above said facts and circumstances, appellant prays that the Tribunal may set aside the Orders in Appeal on merits owing to covered judgments passed by this Tribunal in the interest of justice. 5. Shri Rudra Pratap Singh, learned Additional Commissioner (AR) appearing for the respondent-department has made many preliminary objections to the appeal filed by the appellant, as below. a) Although the appellant has introduced himself as Freight Forwarder they have not taken a registration under the said category but are registered under the Category of Business Auxiliary Services (BAS) and Business Support Services (BSS). b) The appellant has not submitted a copy of Annexure - I and Annexure - B of the First Show Cause Notice (SCN) No. 32 / 2015 dated 18.09.2015. Annexure - I contains the root cause of the current legal dispute between the appellant and the department. Annexure B claimed to contain sample of SCN's, which would help verify the fact that the Service Tax Authorities in Chennai, had issued SCNs only for the difference in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Tracking. He further stated that although the appellant has relied on para No.2.1 and 2.2 of Circular No. 197/7/2016 dated 12.8.2016, from para 3.0 of the circular it is clear that when the freight forwarder acts in the capacity of principal then he will not be liable to pay service tax, but in present case, the appellant had been acting in the capacity of principal with respect to "Business Support Service (BSS)", for which they were duly registered. No facts have been shown by the appellant to prove that they had been acting as principal by prebooking the cargo space with the shipping lines / airlines, and then subsequently selling the same cargo space to "their would be customers / clients (i.e. the exporters / importers)". As per para 4.0 of the said circular, the field formations, were required to take a decision on the basis of four factors: (i) The Facts of the Case. (ii) The Terms of Contract between the Entities Concerned. (iii) The Provisions of the Finance Act, 1994. (iv) The Provisions of the Place of Provision of Services (PoPS) Rules, 2012. In view of the conditions as mentioned at "ii" above, it is clear that perusal of agreements which have been execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding Business Support Service on a principal-to-principal basis IV) The value to be adopted for purposes of computing duty. 8. We find that the impugned order at para 15.0 has examined the issue in detail as to whether the activity is in the nature of buying and selling of cargo space to get excluded from the purview of Service Tax. The same is reproduced below:- "15.0 Whether the activity is in the nature of buying and selling of cargo space and gets excluded from the purview of service tax (for the period both prior to and afterwards 1.7.2012). 15.1 This ground is advocated by the assessee to state that service tax cannot be levied on a transaction of sale. Then, the question that would require answer is whether the present transaction qualifies to be a sale. Section 4 of the Sale of Goods Act, 1930 defines "Sale and Agreement to sell'. Said Section 4 reads as below:- Section 4: Sale and Agreement to sell: (1) a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the Hon'ble Supreme Court considered when an intangible property like 'software' can be considered as goods and it was stated "24. In our view, the term "goods" as used in Article 366(12) of the Constitution of India and as defined under the said Act are very wide and include all types of movable properties, whether those properties be tangible or intangible. We are in complete agreement with the observations made by this Court in Associated Cement Companies Ltd. (supra). A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes, and marketed would become "goods". Thus, an intangible property like 'software' could pass the test prescribed in para extracted above only when it is in canned form. In the present case, there is no conceivable form for space on vessel - like software being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant or merely an agreement of carriage i.e. to carry on board the cargo/ container brought by the appellant to its destination, is not forth coming. The physical space remains with the Shipping Lines / Airlines. It is hence akin to rent, and is a service provided and not a sale. The trade nomenclature of 'buying and selling of cargo space' mentioned by the appellant does not, in this case, take away the substance of provision of the service. As held by the Apex Court in Commr. of Customs, Central Excise and Service Tax v. Northern Operating Systems (P) Ltd. [Civil Appeal No. 2289-2293 OF 2021/ 2022 SCC Online SC 658] the substance and not the form is material in determining the nature of transaction. 9. We now take up both the issues relating to the classification of the service provided by the appellant i.e. as a activity of transporting of goods as Freight Forwarders or as stated by Revenue of providing Business Support Service, together. It is to be stated that this exercise has to be conducted with a critical gap in documents submitted by the appellant as pointed out by Revenue and discussed at para 5 above. We hence depend upon a description of the appellants activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rter of goods rests only on their claim that they act on a principle-to-principle basis while negotiating the booking of space from the Shipping Lines / Airlines. The appellant bills their customers with various charges viz. freight charges, LCL charges, Delivery Order charges, documentation charges, BL fees, Terminal Handling charges etc. which are for services pertaining to Business Support Service. Another important responsibility is undertaking all the legal responsibility for the transportation of the goods along with its attendant risks, while providing the service of transportation of goods, from a place in India to a place outside India. Generally, transportation of the goods are done based on 'adhesion contracts' otherwise called 'standard-form contracts'. These contracts are prepared by the dominant party i.e. in this case the Freight Forwarder to be signed by the party in a weaker position, usually the customer, who has little choice about the terms. In such agreements which are preprinted on the back of the invoice or otherwise and entered into, the Freight Forwarder assumes legal responsibility for the transportation of the goods, howsoever one sided and in his favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceeding paragraphs flow from the application of these two rules. 2.1 The freight forwarders may deal with the exporters as an agent of an airline/carrier/ocean liner, as one who merely acts as a sort of booking agent with no responsibility for the actual transportation. It must be noted that in such cases the freight forwarder bears no liability with respect to transportation and any legal proceedings will have to be instituted by the exporters, against the airline/carrier/ocean liner. The freight forwarder merely charges the rate prescribed by the airline/carrier/ocean liner and cannot vary it unless authorized by them. In such cases the freight forwarder may be considered to be an intermediary under rule 2(f) read with rule 9 of POPS since he is merely facilitating the provision of the service of transportation but not providing it on his own account. When the freight forwarder acts as an agent of an air line/carrier/ocean liner, the service of transportation is provided by the air line/carrier/ocean-liner and the freight forwarder is merely an agent and the service of the freight forwarder will be subjected to tax while the service of actual transportation will not be liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders. It is a known fact in business that intermediaries providing support service try to earn a profit in an oligopolistic market, where business is dominated by few shipping lines/ airlines, the customer has imperfect knowledge about the routes, booking charges of cargo etc. Traders who look for ease of doing business approach any service provider in the trade who can make arrangements that will help ship his cargo and thereby assist his business activities. Entities who are not pure agents of shipping lines / airlines also provide support service to traders due to profits that can be made. They do so by getting an order from a customer, paying the booking charges offered by shipping lines/ airlines and then charge it on the customer after adding a markup. There are no protracted negotiations with the shipping lines/ airlines since this happens only when bulk space is pre-booked. Bulk booking of space gives leverage for negotiations which does not appear to be the case here as no proof has been shown of the same. Mostly the booking is of containers belonging to the shipping line itself. They also offer a range of business activities to the customer, within the taxable territory, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . etc. moving of goods to Harbour in case of export and moving out the goods after getting discharge certificate from the Customs / CFS in case of import etc. Thus the appellant manages the distribution and transportation of cargos to various destinations. All these activities are carried out by them on behalf of their customers and the same are carried out as on operational assistance in relation to business or commerce. These activities are therefore squarely covered by 'operational or administrative assistance in any manner' which is an inclusive part of the definition of Business Support Service. Accordingly, the respondent has correctly held that the above activities carried out by the appellant are rightly classifiable under Business Support Service. Hence, the appellant contention that their service cannot be classified under Business Support Service is not acceptable." The appellant whose activity has failed to establish his credential as a Freight Forwarder is found to satisfy the classification of Business Support Service. We approve of the same. 10. We next take up the case laws and judgments cited by the appellant in their favour. The judgments are listed below. a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. The impugned order was passed before the Apex Court judgment supra brought finality to the matter and was not available for consideration by the learned Commissioner Appeals and before that by the Original Authority. We find that the issue is of importance and merits being examined afresh by the Original Authority based on facts, documentary evidence and the law as laid out by the Apex Court. To claim exclusion of any part of the consideration from the assessable value, prior to the amendment of section 67 ibid, the terms of agreement or understanding between parties should prima facie indicate that there was an obligation upon the service receiver to incur such expenditure which was incurred by the service provider and was later reimbursed by the service receiver to service provider. The appellant needs to be given an opportunity to provide data to demonstrate that reimbursement are in line with law and of actuals, supported by sufficient evidence. 10.1 Further in the context of the issue of double taxation raised by the appellant, a similar question of double taxation i.e. whether a sub-contractor is liable to pay Service Tax even if the main contractor has discharged the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity keeping in mind the change in section 67 and its implication for the different periods covered by the impugned order and the judgment of the Apex Court in Union of India v. M/s. Intercontinental Consultants and Technocrats (supra), we do not feel it proper to go into the legal issue at this stage. 10.3 The final issue pending examination in this case is whether extended period for issue of SCN is invokable or not. The appellant avers that the extended period has been invoked only on the ground that they did not declare the taxable value and assess tax correctly with an intent to evade payment of duty. However the order does not discuss whether the failure to declare freight in the return was with an intent to evade duty and hence extended period cannot be evoked in the absence of any finding of willful suppression. They have relied on the following judgments in this regard:- a. Easland Combines Vs. CCE, CBE - 2003 (152) ELT 39 (SC) b. Pushpam Pharmaceuticals Co. Vs. CCE, Bombay - 1995 (78) ELT 401 (SC) c. Cosmic Dye Chemicals Vs. CCE, Bombay - 1999 (75) ELT 721 (SC) d. Padmini Products Vs. CCE - 1989 (43) ELT 195 (SC) e. Tamilnadu Housing Board Vs. CCE, Madras - 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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