Whether booking of cargo space in shipping lines leviable to service tax under ‘BAS’?

PJ/Case Law/2013-14/1999

Case:- GREENWICH MERIDIAN LOGISTICS (I) PVT. LTD. VERSUS COMMR. OF S.T., MUMBAI

Citation:- 2013 (32) S.T.R. 753 (Tri. - Mumbai)

Brief Facts:- The Revenue has filed the COD application for condonation of delay of 22 days in filing the cross objection. The delay is due to delay in receipt of comments from the lower formations for filing the cross objection. Considering the reasons stated as satisfactory, we condone the delay in filing the cross objection. M/s. Greenwich Meridian Logistics (I) Pvt. Ltd. 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 Service" and the appellant was promoting the service rendered by the shipping lines. Accordingly, a service tax demand of Rs. 2,27,02,697/- was confirmed against the appellant for the period 2005-06 to 2009-10 and an amount of Rs. 48,43,493/- for the period April, 2010 to March, 2011. Interest on the said demand was also confirmed apart from imposing penalties under the provisions of Section 76 of the Finance Act, 1994. Aggrieved by the said decision, the appellant is before us.

Appellant Contentions:- The appellant submits that they have booked cargo space from the shipping lines by purchasing the space and thereafter, they sold the space to their customers. This activity is one of trading and therefore, no service has been rendered to the shipping lines. Secondly, it is argued 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. The appellant also relies on a number of decisions in support of the above contention.

(i)          Skylift Cargo Pvt. Ltd. v. CST, Chennai - 2010 (17) S.T.R. 75 (Tri.‑ Chennai)
(ii)         BAX Global India Ltd. v. CST, Bangalore - 2008 (9) S.T.R. 412 (Tri.- Bang.)
(iii)        Baroda Electric Meters Ltd. v. CCE - 1997 (94) E.L.T. 13 (S.C.)
(iv)        Karnavati Club Ltd. v.1101- 2010 (20) S.T.R. 169 (Guj.)
(v)         Interocean Shipping Co. v. CST, Delhi - 2012-TIOL-CESTAT-Del = 2013 (30) S.T.R. 244 (Tri.)
(vi)        Group M. Media India Pvt. Ltd. v. CCE, Thane - 2012-TIOL-804- CESTAT-MUM

Accordingly, it is pleaded that stay be granted.

Respondent Contentions:- The respondent submits that the appellants are freight forwarders and booking cargo spaces and selling the same to the importers/exporters. They are rendering a service to the shipping lines and the consideration is received by them by way of mark-up in price and therefore, the service rendered by the appellant merits classification under "Business Auxiliary Service". He relies on the decision in the case of JSA Forwarders v. CST, Chennai – 2009 (13) S. T.R. 396 (Tri.-Chennai), Miscellaneous Order No.40389/2013, dated 4-2-2013 passed by the CESTAT Bench at Chennai upheld by the Hon'ble High Court of Madras in Leap International Pvt. Ltd. v. CST, 2013-TIOL-363-HC-MAD-ST = 2013 (32) S.T.R. 257 (Mad.). The Revenue relies on this Tribunal decision in the case of Phoenix International Freight Services Pvt. Ltd. vide Stay Order No. S/450-451/13/CSTB/C-I, dated 8-4-2013 and accordingly, it is pleaded that the appellant be put to terms.

Reasoning of Judgment:- We have carefully considered the submissions made by both the sides. 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 service. Any activity other than supply of goods amounts 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 be 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. As regards the case laws cited by the appellant in the case of Skylift Cargo Pvt. Ltd. the facts of that case related to discount allowed by the airlines and the question was whether the discount can be considered as commission and it was held that the 'discount" is not commission. We do not know how the ratio of this decision applies to the facts of the present case. As regards the Box Global India Ltd. case relied upon by the appellant, the issue therein was whether the service rendered as freight forwarding agency is classifiable as CHA service and it was held that the said service would not come within the purview of CHA services which deals with entry or departure of conveyances or import or export of goods at any customs station. In the present case, the demand is not under CHA service but under BAS and therefore, reliance on this decision also does not support the case of the appellant. In the Baroda Electric Meters Ltd. case, the issue was whether equalised freight can be added to the assessable value of excisable goods sold for the purposes of levy of excise duty. It was held that it cannot be added. We do not find how this ratio would apply to the facts of the present case. Similarly, in the case of Karnavati Club the issue for consideration was in the service rendered by a club to members is exigible to service tax or not. We do not find any club member relationship involved in the case of Freight Forwarding Agency service. Thus most of the decisions relied upon by the ld. Counsel for the appellant do not have any application or relevance to the facts of the present case and therefore, we do not find any merit in the arguments made by the ld. Counsel for the appellant. This Tribunal in the case of JSA Forwarders case (cited supra) relied upon by the Revenue dealt with a situation wherein the issue was whether service rendered by a freight forwarder would merit classification under BAS or not. After looking at the comprehensive definition of BAS, the Tribunal came to the prima facie conclusion that sale of cargo space would also attract service tax levy under the head "Business Auxiliary Service". Similarly, in the case of Leap International Pvt. Ltd. case, this Tribunal considered a question whether sale of cargo space can be considered as BAS or not and concluded that the said service might merit classification under BAS. The appeal against the said decision before the Hon'ble High Court of Madras was dismissed.In view of the above, we are of the prima facie view that the appellant has not made out a case for complete waiver of pre-deposit of dues adjudged against them. The appellant has also not pleaded any financial hardship nor any evidence in this regard has been placed before Tribunal. In the absence of any prima facie case and the absence of any financial hardship, the interest of Revenue has to be taken care of. Accordingly, we direct the appellant to make a pre-deposit of Rs. 89 lakhs which as per the appellant would be the demand for normal period of limitation. The said deposit shall be made within a period of eight weeks from today and compliance reported on 11-9-2013. On such compliance, the balance of dues adjudged shall stand waived and recovery thereof stayed during the pendency of the appeal. The ld. Counsel for the appellant is present in the Court and has noted the orders given above and that constitutes sufficient notice to the appellant to comply with this order. In case of non-compliance, the appeal is liable to be dismissed without any further reference to the Tribunal.

Decision:-Stay granted partly.

Comment:- The substance of this case is that booking of cargo space in shipping lines primarily amounts to rendering of service and promoting the service of the shipping lines. As such, the activity is leviable to service tax under the category of “BAS”.

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PJ/Case Law/2013-14/1999

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