M/s. Freight Systems (India) Pvt. Ltd. Versus Commissioner of GST & Central Excise Chennai South Commissionerate
Service Tax
2018 (7) TMI 333 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 28-3-2018
ST/EH/41888 & 41889/2017 and ST/152 & 153/2012 and ST/CO/32 & 33/2012 – 41012-41013/2018
Service Tax
Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical)
Shri S. Muthuvenkataraman, Advocate for the Appellant
Shri K.P. Muralidharan, AC (AR) for the Respondent
ORDER
Per Bench
The appellants are registered with the service tax department under the category of Business Auxiliary Service, Business Support Service, Cargo Handling Service, Storage Warehousing Service and Transport of Goods by Road service. During the course of audit of accounts, it was noticed that they collected charges under various heads such as documentation charges, examination charges, processing fees, stuffing charges and freight charges for transportin
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he appellant is liable to service tax under the category of BAS for the period 2004 – 2006 and under the category of BSS for the period 2006 – 2010. After due process of law, the original authority confirmed the demand under BAS for the entire period along with interest and also imposed penalties. Another ground on which the demand was confirmed is that the services rendered to SEZ unit are not liable for exemption under Notification No.4/2004 as the services were performed outside the SEZ. Aggrieved, the appellants are now before the Tribunal.
2. The department has filed cross objections No. ST/CO/32 & 33/2012 contending that for the period 2006 to 2010, as the show cause notice has alleged the activity to fall under BSS, the Commissioner ought to have held that the activity is taxable under BSS and not under BAS.
3. On behalf of the appellant, ld. counsel Shri S. Muthu Venkataraman submitted that the details of the show cause notice, period of dispute and the amount involved in the
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ervice Tax, Mumbai – 2017 (47) STR 129
5. It was added by him that for the period 2006 – 2010, though the show cause notice alleges that the activity would fall under the category of BSS, the Commissioner has confirmed the demand under BAS, the Commissioner has thus travelled beyond the scope of the show cause notice and therefore the demand cannot sustain on this sole ground itself.
6. With regard to the issue whether the exemption under Notification No.4/2004 is available to the service provided to the SEZ Units, he relied upon the decision of the Tribunal in the case of Vision Pro Event Management vide Final Order No. 40964/2018 dated 28.3.2018.
7. The ld. AR Shri K.P. Muralidharan reiterated the findings in the impugned order.
8. Heard both sides.
9. The demand has been raised alleging that the freight charges collected by the appellant forms part of taxable value under BAS for the period 1.7.2003 to 30.4.2006 and would fall under the category of BSS with effect from 1.5.2006.
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tted to single or multiple customers or in multiple consignments to single customer for a profit.
(c) This freight difference (difference between price at which it is booked with airlines and the price at which it is offered to customers) is accounted as Incentive, Discount, Overriding Commission, Market Price Adjustment etc., depending upon the terminology used by the airlines. This is evident from the CA Certificate and the subsequent period notices.
(d) While the department stand is that this freight difference is earned on account of promoting an airline, whereas, there is no payout by the airlines to the assessee. On the other hand, the assessee recovers full freight from the exporters and the difference between the purchase and sale price is retained by the assessee.
(e) The assessee issues House Airway Bills to their customers based on which the transportation takes place and, therefore, act in the capacity of a transporter/principal, rendering service to exporters„
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rters. Demand of service tax has been made on the very difference only. In respect of the very same issue on which appeal has been filed, for number of subsequent show-cause notices, the matter has been decided in their favour by the Commissioner (Appeals), In fact, in one of such cases, the department is in appeal no.ST/41474/2013. (i) What has been termed as an incentive is nothing but freight difference, the fact of which has been certified by the CA certificate. The subsequent notices issued by the department also vindicate this stand.
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“11. On the second issue regarding the service tax liability of the respondent under BAS, we find that the impugned order examined the issue in detail It was recorded that the income earned by the respondent to be considered as taxable under any service category, should be shown to be in lieu of provision of a particular service. Mere sale and purchase of cargo space and earning profit in the process is not a taxable activity
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under business auxiliary service since10-9-2004. The original authority recorded that the show-cause notice did not specify as to who is the client to whom the respondent is providing service. Original authority considered both the scenario, airline/shipping lines as a client or exporter/shipper as a client. In case, the respondent is acting on behalf of airlines/shipping lines as client, it was held that they are covered by tax liability under BAS. Further, examining the issue the original authority viewed that commission amount is necessarily to be obtained out of transaction which is to be provided by the respondent on behalf of the client, that is, the exporters. The facts of the case indicated that the mark-up value collected by the respondent from the exporter is an element of profit in the transaction. The respondent, when acting as agent on behalf of airlines/shipping lines was discharging service tax with effect from 10-9-2004. However, with reference to amount collected from
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be set aside, which we hereby do.
11. The issue whether the services rendered to SEZ unit is eligible for exemption as per Notification No. 4/2004 has been considered by the Tribunal in the decision of Vision Pro Event Management (supra). The relevant portion of the order of the Tribunal is as under:-
“5.1 The issue is whether the appellants are eligible for the service tax exemption under the Notification No. 4/2004 for the services rendered to SEZ unit. For better appreciation, the relevant part of the notification is reproduced as under:-
The Central Govt. being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service of any description as defined in clause (105) of Section 65 of the said Act provided to a developer of Special Economic Zone or a unit (including a unit under construction) of Special Economic Zone by any service provider for consumption of the services within such Special Economic Zone, from the whole of service tax leviable t
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e, taking into consideration the impact of Section 51 of the SEZ Act which provides for overriding effect over any other law, we are of the considered opinion that the benefit of tax exemption cannot be denied by giving a restrictive interpretation to Notification No. 4/2004 Our view is supported by the fact that the notification which superseded notification No. 4/2004 has categorically stated that whether or not the taxable services are provided inside the SEZ, the exemption is available, The relevant portion of the Notification No. 9/2009 is reproduced as under:-
In exercise of the powers conferred by sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994), and in supersession of the notification of the Govt of India, Ministry of Finance (Department of Revenue), No. 4/2004-ST, dated 31.03.2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated the 31s.03.2004, vide G.S.R. 248 (E), dated 31.03.2004, except as respects things don
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product of SEZ. the services provided is to be considered as consumed within SEZ. It also needs to be mentioned that for availing the services, the SEZ has to get these services approved by the Development Commissioner. The department then cannot contend that these services are not eligible for refund since these are not consumed within SEZ. From the above discussions, we are of the considered opinion that the denial of benefit is unjustified. The impugned order is set aside. The appeal is allowed with consequential benefits, if any, as per law.
12. In view of the said decision, we are of the view that the denial of exemption is not legal and proper and requires to be set aside, which we hereby do.
13. In the result, the impugned orders are set aside and the appeals are allowed with consequential relief. The cross-objections filed by the department for classifying under BSS do not merit consideration as no material to substantiate the same has been furnished, Hence the cross-objecti
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