BSV Shipping Agencies Private Limited vs. Commissioner of GST and Central Excise - (Customs, Excise and Service Tax Appellate Tribunal) (25 Mar 2024)

Demand of Service Tax on ocean freight cannot sustain

MANU/CC/0086/2024

Service Tax

The Appellant is engaged in providing Custom House Agent Services, Steamer Agent Services and Business Support Services. The Appellant collected excess amount from their customers over and above the actual ocean freight paid to the shipping lines. They did not discharge Service Tax on the excess amount collected from the clients. The Department was of the view that, the said amount is liable to Service Tax.

The Show Cause Notice was issued to the Appellant proposing to demand Service Tax on excess amount collected to the tune of Rs.85,035. After due process of law, the Original Authority confirmed the demand of Rs.85,035 on excess ocean freight collected by the Appellant during the period from April 2012 to September 2012 along with interest and imposed penalty under Section 76 and 77 of the Finance Act, 1994. Aggrieved by such order, the Appellant filed appeal before the Commissioner (Appeals) who upheld the same. Hence this appeal. The issue to be considered is whether the Appellant is liable to pay Service Tax on excess amount collected towards the ocean freight.

The ocean freight cannot be subjected to levy of Service Tax as it is not a consideration for Steamer Agency Services. The Department itself admits that, these are amounts collected in excess of ocean freight. There is no provision for levy of Service Tax on ocean freight.

Further, as per the decision in the case of Sal Steel Ltd. Vs. Union of India, the Hon'ble High Court has held that, the demand of Service Tax on ocean freight cannot sustain. The said decision was followed by the Hon'ble High Court of Madras in the case of Chennai and Ennore Ports Steamer Agents Association Vs. Union of India. Though Department alleges that, the Appellant has collected excess amount towards freight, the Show Cause Notice does not say as to which category of service the said amount would be liable to Service Tax. So also, it is not stated whether the amount is consideration for Steamer Agency Service. The Show Cause Notice does not propose to include the amount under particular category of service and demand the Service Tax under any category.

The Adjudicating Authority has not made any finding as to whether the excess amount collected would be consideration for service. The Show Cause Notice is the foundation of the litigation. When the Show Cause is insufficient as to clarify the category of service, the demand cannot sustain and requires to be set aside. The impugned order is set aside. Appeal is allowed.

Tags : SCN TAX LEVY