By TIOL News Service

MUMBAI, SEPT 27, 2014: A Rs.208 crores Service Tax demand was confirmed against the appellant by the Commissioner of Service Tax-II, Mumbai. Equivalent penalty and interest also gave company to the service tax demand.

The case: The appellant is registered as a steamer agent and they are paying service tax liability on the consideration received by them as steamer agent on behalf of the shipping lines. The appellant collects various charges such as, ocean freight, currency adjustment charges, bunkering charges and advance manifest charges and remits these amounts to the shipping lines situated abroad. All these charges form part of the customs value of the goods imported or exported. The present demand is towards service tax liability on all these charges which, in fact, form part of the customs value.

Before the CESTAT the appellant submitted that all these amounts collected and remitted to the shipping lines are not consideration received for rendering of any service. Inasmuch as on the consideration received for services of a steamer agent they have discharged service tax liability and, therefore, the question of subjecting the entire amount collected, received and transmitted cannot form the part of the consideration received for levy of service tax. Reliance is placed on the decision of Chennai Bench Final Order NO. 40437/2014 dated 23/06/2014 wherein a view was taken that service tax is not leviable on ocean freight and the matter was remanded back to the adjudicating authority for fresh consideration. Therefore, stay be granted and the appeal disposed of.

The AR submitted that the appellants were asked to furnish details of the actual amount of freight collected and remitted and in spite of repeated reminders, they did not furnish the requisite information and, therefore, the adjudicating authority was constrained to confirm the service tax on the entire amount which they had collected from the various importers/exporters. Therefore, the appellants need to be directed to furnish all the information sought so that the department can examine the issue in proper prospective.

The Bench observed -

"4.2 The short question for consideration is whether the ocean freight, currency adjustment charges, bunkering charges, advance manifest charges collected by the appellant on behalf of the shipping lines can be subjected to levy of service tax. It is undisputed that most of these charges form part of the transaction value in respect of customs matters and therefore, the question of levy of service tax on a customs transaction would not arise at all. If the appellants have collected these charges and remitted the same to the shipping lines, the whole amount received and transmitted cannot be said to be a consideration for the services rendered. What can be levied to service tax is the service rendered by the appellant either as a steamer agent or BAS in respect of collection of freight and other charges and only on the consideration received for the services rendered, service tax can be levied. In this view of the matter, the impugned order is clearly not sustainable in law and the matter has to go back to the adjudicating authority for de novo consideration. The appellant is also directed to co-operate with the department and submits all the requisite particulars, such as, the amount of ocean freight and other charges collected by them and the amount transmitted by them to the foreign shipping lines and the amount of consideration received/retained by them in respect of the services rendered and whether service tax liability has been discharged on the consideration received by them for rendering of the services. On submission of such information, the adjudicating authority shall examine the matter afresh and pass a speaking order after giving due opportunity of hearing to the appellant…."

The appeal was allowed by way of remand.

In passing: 208 crores demand back to square one. Also see 2014-TIOL-852-CESTAT-KOL.

(See 2014-TIOL-1860-CESTAT-MUM)