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TMI Blog2009 (3) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... 006. In the said order, the amounts were confirmed by the Commissioner. The appellants were aggrieved over the above order. Consequently they filed an appeal before this Bench. This Bench remanded the matter for de novo decision. Consequently the de novo decision has been passed. The order impugned is the de novo order. The issue involved is whether the following charges collected by the appellant are liable to be taxed under CHA services:- (i) Charge Collect fees (CCX fees) (ii) Break Bulk fees (iii) Profit share from origin (iv) Unallocated income (v) Currency Adjustment Factor (CAF) (vi) Freight rebate (vii) Airline commission and sea freight brokerage (viii) Air freight incentives (ix) Expenses reimbursement billing The Adjudicating authority has discussed each of these charges and came to the conclusion that they are includable in the value of the taxable services, namely CHA services. Similarly, certain other charges had been held to be forming part of the value of the CFA services rendered by the appellant. The Adjudicating authority has confirmed an amount of Rs. 3,96,51,830 under the category of CHA services for the period from 2000-04. An amount of Rs. 28,64,218 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore customs. 6. Consol agents issues the Delivery Order after collecting their C.A.N. amount to their customs broker for taking delivery of goods. 7. Customer's authorized broker files the Bill of Entry based on the consol agents C.A.N. and other documents in Customs office Note: CHA license is must for filing BOE by customs brokers. 8. Assessment of the Bill of Entry by customs and payment of duty by the importer to customs via SBI Bank. 9. Examination of cargo by customs and passed out order taken from customs by the customs broker. 10. Payment of warehouse charges by customer/agent and issue of gate pass by the custodians of cargo to customer's authorized agents Customs House Agent's Activity 11. Customs broker takes delivery of goods from custodians after arranging transportation. 12. Delivery of cargo to customers place and customs broker issue's customs clearance service bill for payment. These documents also include invoice issued to the customer for freight forwarding services as well as letter issued by the customer indicating that the necessary documents including the delivery order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d releases the cargo. Thus these activities are distinct from CHA services. (ii) Extract of Air Cargo Tariff Manual - Paras 4.6 & 7.2 of the Air Cargo Tariff Manual (TACT) clearly indicates that CCX fee is recovered by the appellants for collection of freight at destination from the consignee. As the freight is collected from the consignee at the destination, the same is termed as charges collect fees. Therefore, CCX fee is charged for services provided for collection of freight and not for provision of any CHA services. (iii) Declaration from consignee regarding nature of CCX fees - A declaration obtained from customers is attached which would clearly establish that such services are provided for collection of freight from the consignee in India and not towards the provision of CHA services. Moreover, in respect of the CCX fees, the Commissioner of Service Tax, Chennai has held that such activities are not taxable under 'cargo handling services' vide the Order-in-Original No. 7/2006, dated 30-3-2006. (b) Break bulk fees - In respect of cargo originating at a location outside India land terminating in India, Excel Group Entities located outside India, allocates a percent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments were enclosed. (e) Currency Adjustment Factor - Currency Adjustment Factor (CAF) is collected as part of the freight to neutralize the exchange rate fluctuation. Exel does not collect CAF separately from the shipper/consignee. It is inbuilt in the freight charged to the shipper/consignee. CAF is not charged separately in the invoice issued to the shipper/consignee, however, the same is accounted separately in the accounts. This charge relates to the freight amount payable for air imports/sea imports which is a part of freight forwarding services. The same has not connection with the CHA services and hence is not taxable under CHA services. (f) Air/Sea Freight Rebate - Air/Sea Freight Rebate is a margin derived on principal-to-principal transaction and it is not for rendering CHA service. The nature of Air/Sea Freight Rebate is as follows:- (i) Excel is given a quote for air cargo transportation charges, i.e., to tonnage/space rates on a pallet basis by an Airline/shipping line. Such quotes are usually offered by airlines for bulk cargo or large quantity basis. As per industry nomenclature, this quote is referred to as the "buy rate". The airline issues a Master AWB to Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some cases, such reimbursements are claimed on an equalized basis. The expenses incurred on behalf of customers and the recovery thereof is accounted in ledger accounts. The expenses of reimbursement claimed by Excel has no connection with Customs Clearance services. Therefore any margin earned on the same cannot be included in the taxable value for CHA services, Moreover, in respect of other reimbursements for freight forwarding services, the Commissioner of Service Tax, Chennai had dropped the demand under Cargo Handling Services vide-Order-in-Original No. 7/2006, dated 30-3-2006. (iii) Clearing and forwarding agents services (CFA Services) - In respect of CFA services on Rental Income and Transportation charges received from customers, Excel provides logistics services which may include clearance, warehousing and distribution services. Such services are provided under three broad categories i.e., & Open book contract (Cost plus contract); Close book contract (Fixed fee contract) and Comprehensive service contract. The open book contract and close book contracts are generally warehousing and transportation contracts whereas the Comprehensive service contracts are integrated log ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The balance in these accounts could either represent short recovery or excess recovery due to claim based on equalized basis. A surplus, is derived out of the difference between charges collected and actual expenses incurred on such charges. These reimbursements relates to CHA services are not includible in the taxable value in line with the Board's Circular F.No. B43/1/97-TRU, dated 6-6-1997. In the light of the aforesaid Circular, the margin earned on account of expense reimbursement related to CHA services can also be excluded for the taxable value of CHA services. The Commissioner of Service Tax, Chennai vide Order-in-Original Nos. 2/2006 and 3/2006, dated 24-2-2006 in the party's own case and the Commissioner of Central Excise (Appeals), Bangalore vide Order-in-Appeal No.61 /2006-CE, dated 26-4-2006 in the case of Supreme Freight Services has dropped the demand in respect of reimbursement of expenses pertaining to CHA services. (v) Inclusion of Income from CFA services under CHA services.- While computing the demand of service tax on CHA services as indicated in Annexure to the show-cause notice dated 27-7-2005, there has been an error as such the income and expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m including the reimbursement. We have also examined the scope of the Customs House Agent (CHA) as defined in the CHA Regulation, 2004. This cannot be ignored, even in the matter pertains to service tax as observed to the contrary by the Commissioner in the impugned order. We have clearly held after going through the definition of CHA in the case of Bax Global India Ltd. (supra) that the activity of CHA relates to entry or departure of conveyances or import or export of goods at any customs station. Therefore activities of CHA is limited to customs station and it cannot extend beyond it. For example, in the present case, the appellant collected air freight for export from the consignee. This activity relates to freight charges collected for transportation service rendered by airliner. In other words, this freight forwarding cannot be said to be activities of Customs House Agent (CHA). In a similar manner, each charge ought to have been examined by the Commissioner. This has not been done. Moreover, the Commissioner has confirmed exactly the same amount confirmed in his first Order-in-Original which was set by this Bench. The demand of service tax on transportation under the categor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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