The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) consisting of Sulekha Beevi C.S. (Judicial Member) and P. Anjani Kumar (Technical Member) has held that the ocean freight charges collected from customers are not subject to the levy of Service Tax under Business Support Services.The appellant/assessee is a freight forwarder and is engaged in...
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) consisting of Sulekha Beevi C.S. (Judicial Member) and P. Anjani Kumar (Technical Member) has held that the ocean freight charges collected from customers are not subject to the levy of Service Tax under Business Support Services.
The appellant/assessee is a freight forwarder and is engaged in freight forwarding of import and export shipments. They provide various services and collect charges in the nature of LCL charges, Bill of Lading fees, handling charges, etc., on which they pay Service Tax. They also collect ocean freight charges from their customers and pay them to shipping lines or shipping companies. The appellant did not pay any service tax on the ocean freight charges.
The Department was of the view that the appellant is liable to pay service tax on the ocean freight charges collected by them as these fall under business support services. It was alleged by the Department that the appellant, which is a SEZ unit, is not eligible for a refund/credit in respect of the input services for the reason that the services are not physically consumed within the SEZ unit.
The show cause notices were issued to the appellant, proposing to demand service tax.
The issue raised was whether ocean freight charges collected are subject to the levy of Service Tax.
The petitioner contended that, according to Section 67 of the Finance Act of 1994, the value of a taxable service is the gross amount for providing such a service. The ocean freight is not a charge incurred by the appellant in the course of providing freight forwarding service. The appellant makes payment to the shipping liners for transportation of its clients' cargo and recovers it from their clients. Hence, ocean freight does not form part of the value of taxable service rendered by the appellant in relation to freight forwarding service.
The CESTAT relied on the decision of the Mumbai bench of CESTAT in the case of M/s. Greenwich Meridian Logistics (I) Pvt. Ltd. v. Commr. of S.T. It was held that freight is paid to the shipping line and freight is collected from client-shippers in two independent transactions. Section 65(19) of Finance Act, 1994 will not address these independent principal-to-principal transactions of the appellant, with the space so purchased being allocable only to the appellant. The shipping line fails in its description as a client whose services are promoted or marketed.
Case Title: M/s. Geodis Overseas Private Limited Versus The Commissioner of Service Tax
Citation: Service Tax Appeal No. 158 of 2012
Dated: 24.06.2022
Counsel For Appellant: Advocate Raghavan Ramabadran
Counsel For Respondent: Authorized Representative K. Komathi