GAC Shipping (India) Pvt. Ltd vs Commissioner of GST & Central Excise

GST update /2026-27/0039

GST UPDATE

Hon’ble Appellate Authority: CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, CHENNAI

Case Title: GAC Shipping (India) Pvt. Ltd vs Commissioner of GST & Central Excise

Appeal No. & Citation: Service Tax Appeal No. 41944 of 2016

Hon’ble Judge(s) Hon’ble Shri M. Ajit Kumar, Member (Technical) & Hon’ble Shri Ajayan T.V., Member (Judicial)

Date of Order 10.06.2026

Outcome In favour of the Appellant

Brief Facts of the Case

During departmental audit, it was observed that the appellant, GAC Shipping (India) Pvt. Ltd. paid ocean freight charges to their principals and thereafter recovered freight charges from its customers at a higher amount by adding a mark-up or margin. The Department formed a view that such mark-up and share of profit were taxable under the category of Steamer Agent Service. Consequently, a Show Cause Notice was issued proposing demand of Service Tax along with Interest and penalty under Sections 76 and 77 of the Finance Act, 1994. The adjudicating authority confirmed the demand along with interest and penalties. The Commissioner (Appeals) upheld the order. Aggrieved, the appellant filed an appeal before the CESTAT.

Question before Hon’ble Authority

Whether the profit earned by the appellant on ocean freight is liable to Service Tax, i.e., the difference of actual ocean freight charges paid to the shipping line and the freight charges collected from the customer under the Finance Act, 1994?

Brief Arguments by Appellant

• The Authorities should not adopt a discriminatory approach. For the immediately preceding period (January 2012 to September 2012), the same Tribunal had already examined an identical issue and allowed the appeal in favour of the appellant.

• The appellant held that the issue is not res integra. Reliance was placed on decision in case of Baroda Electric Meters Ltd. v. Collector where in the Supreme Court held that where the freight actually paid is less than the freight amount recovered, the difference merely represents profit and cannot be added to assessable value.

• Reliance was also placed on the decision given by various CESTAT in its favour which are tabulated as follows:

CESTAT, Ahmedabad - Gudwin Logistics (2010) 18 STR 348 (Tri.-Ahmd)

A.G.X Logistics Pvt. Ltd Final Order Nos. 41104-41106/2023 dated 12.12.2023

CESTAT Delhi - Tiger Logistics Ltd 2022 (63) G.S.T.L 337 (Tri-Del)

CESTAT Mumbai - EMU Lines Pvt. Ltd. 2023 (4) CENTAX 122 (Tri-Bom)

Brief Arguments by Respondent

• The Department contended that although the earlier Order in-Appeal had set aside a similar demand, that order was accepted only on account of low revenue implications. Such acceptance does not have precedential value. Therefore, the issue must be decided independently on merits.

• The Revenue emphasized that after 01.07.2012, every service became taxable unless specifically excluded. In the instant case, the appellant received consideration from customers in the form of mark-up. The activity was neither covered under the negative list nor exempted under Notification No. 25/2012-ST. Therefore, service tax was correctly demanded on the mark-up amount.

Findings and Judgement

• Earlier Decision in Appellant's Own Case is Directly Applicable

The Tribunal observed that the identical issue for the immediately preceding period had already been decided in favour of the appellant. Therefore, the ratio of the previous decision is equally applicable for the identical issue. The earlier order in appellant's own case remained operative as the Revenue could not show that any higher forum had stayed, reversed, or modified those decisions.

• Reliance on Supreme Court's Decision in Baroda Electric Meters

The Tribunal reproduced and relied upon the ratio of the Supreme Court in Baroda Electric Meters Ltd. v. Collector which held that the duty of excise is a tax on the manufacturer and not a tax on the profits made by a dealer on transportation. Applying the same rationale, the Tribunal held that the mark-up earned by the appellant represented profit and had no nexus with the activity of Steamer Agent Service. Therefore, it could not be included in the value of taxable services.

Accordingly, the impugned order was set aside and the appeal was allowed.

CA PRADEEP JAIN

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