ITC Freight Services Pvt. Ltd. Vs. C.C., C.E. & S.T., Cochin - (Customs, Excise and Service Tax Appellate Tribunal) (26 Jul 2021)

Activity of Freight Forwarding per se is not includible in CHA Services

MANU/CB/0060/2021

Service Tax

The present appeal is directed against the impugned order passed by the Commissioner of Service Tax, confirming the demand of service tax of Rs. 84,81,190 under the category of "Customs House Agent Services" for the period 2008-2009 to June 2012 and Rs. 10,50,656 on margin earned on trading of freight for the period from July 2012 to March 2013 along with interest and penalty under Section 76 and 77(2) and 78 of the Finance Act, 1994.

The Appellant is a private limited company and is mainly engaged in the business of freight forwarding wherein it undertakes various activities in relation to transportation of goods in the course of import/export by sea and air. Appellant is also authorized to act as Customs House Agent under Customs House Licensing Regulations, 2004 and has been granted license of Customs House Agent.

The scope of CHA service is restricted only to the licensed activities relating to either (a) entry or departure of conveyances at any Customs Station or (b) import or export of goods at any Customs Station. Further, from the definition of 'CHA' Services that, freight forwarding is an activity outside the scope of a CHA's business, and freight forwarding is undertaken to get the goods transported from/to international boundaries to/from the Indian ports and the said activity is not in any way related to CHA's business and CHA is not required to execute these services in the course of CHA's business. In the case of Bax Global India Ltd. vs. CST, Bangalore, it has been held that the scope of the activity of a Custom House Agent is limited to the entry or departure of conveyances or import or export of goods at any customs station and does not extend beyond the same.

Further, the finding of the learned Commissioner that the activity of the appellant is a composite service and the main service out of the bundle of composite services is CHA service is factually incorrect because the Appellants have not been charging a lumpsum amount rather the Appellants have been charging separate amounts indicated in the CAN/Invoice for individual activities and the activities are separately provided depending upon the requirement of the customer and therefore, the principles of classification adopted by the learned Commissioner is not applicable in the instant case.

Further, freight forwarding charges are recovered by the Appellant independent of the CHA Service provided by them to their customers. It is a settled law that where an amount is considered as part of the value of goods, the same amount cannot be subjected to service tax as held by the Tribunal in the case of United Shippers and affirmed by the Hon'ble Apex Court.

As far as extended period of limitation is concerned, the ingredients mentioned in terms of proviso to Section 73(1) of Act has not been fulfilled by the Department and moreover in the present case, the Appellant has a bona fide belief that, they are not liable to pay service tax on the differential freight amount collected. The whole issue of leviability of service tax on Freight Forwarding activity was not clear and it was only after the decision of Bax Global India Ltd. v. CST, Bangalore, the activity of Freight Forwarding per se was held to be not includible in CHA Services. Therefore, the issue involved relates to interpretation of provisions of a statute and in such a situation, extended period cannot be invoked. The impugned order is not sustainable in law and therefore, the same is set aside. Appeal allowed.

Tags : DEMAND CONFIRMATION LEGALITY