By TIOL News Service

MUMBAI, AUG 12, 2013: THE appellants are a freight forwarding agency and they are also registered as a multi-modal transport operator. They book cargo space in shipping lines and thereafter, they provide/allot the space to their customers. The department was of the view that the activity undertaken by the appellant comes within the category of "Business Auxiliary Services" and the appellant was promoting the service rendered by the shipping lines.

Accordingly, a total service tax demand of Rs.2.75 Crores for the period 2005-06 to 2009-10 and April 10 to March 2011 was issued and confirmed along with penalties and interest by the Commissioner of Service Tax, Mumbai.

Against these orders, the appellant is before the CESTAT and submits -

++ that they have booked cargo space from the shipping lines by purchasing the space and thereafter, they sold the space to their customers and, therefore, this activity is one of trading and therefore, no service has been rendered to the shipping lines.

++ that they are a multi-model transport operator and, therefore, under the provisions of Multi-model Transportation of Goods Act, 1993 they have to be considered as "Carriers" and therefore, the amount charged by them should be considered as "freight". If, this is done, the question of charging service tax on freight would not arise.

++ Reliance is placed on the following decisions in support -

i) Skylift Cargo Pvt. Ltd. vs. CST, Chennai - (2009-TIOL-1452-CESTAT-MAD)

ii) BAX Global India Ltd., Vs. CST, Bangalore - (2008-TIOL-276-CESTAT-BANG)

iii) Baroda Electric Meters Ltd Vs. CCE - (2002-TIOL-96-SC-CX)

iv) Interocean Shipping Co. Vs. CST, Delhi - (2012-TIOL-1824-CESTAT-DEL)

vi) Group M Media India Pvt. Ltd., Vs. CCE, Thane - (2012-TIOL-804-CESTAT-MUM)

The Revenue representative submitted that the appellant is rendering a service to the shipping lines and the consideration is received by them by way of mark-up in prices and, therefore, the services rendered by the appellant merits classification under "Business Auxiliary Service". Reliance is placed inter alia on the decision in Leaap International Pvt. Ltd. Vs. CST, Chennai - (2013-TIOL-363-HC-MAD-ST).

The Bench observed -

"6.1 Cargo space is not goods; therefore, booking of cargo space and trading in cargo space cannot be considered as supply/sale of goods and has to be considered as supply of services. Any activity other than supply of goods amount to supply of service. Therefore, we do not find any merit in the argument of the Ld. Counsel that they have indulged in trading activity and not in service activity. Secondly, we also do not find much force in the argument of the appellant that service has to rendered always as an agent. The law does not warrant that the service provider has to be an agent. As in the case of goods, service also can be supplied/rendered on a principal to principal basis…"

Noting that the case laws cited by the appellant do not do not have any application or relevance to the facts of the present case and hence there was no merit in the arguments made by the appellant, the Bench held that the appellant had not made out a prima facie case in their favour for getting a waiver of pre-deposit of the adjudged dues.

Holding that the interest of Revenue has to be taken care of, the appellant was directed to make a pre-deposit of Rs.89 lakhs (which is claimed to be the demand for the normal period of limitation) and report compliance.

(See 2013-TIOL-1206-CESTAT-MUM)