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III. Tribunal
Service tax not payable under business auxiliary service on surplus arising from purchase and sale of space in a principalto- principal transaction of multi-modal transporters.
Facts
Appellant engaged in handling logistics of exporters for delivery to consignee is a registered multimodal transport operator assumes responsibility for safe custody of cargo as “common carrier”. The difference earned by way of profit margin by the appellant on ocean freight charged to the shipper and the amount of freight paid to the steamer agent / shipping line was the subject matter of dispute as Revenue held it as commission liable as business auxiliary service inferring that appellant promoted and marketed services of client – shipping lines. Appellant contended that they do not act as agent either for shippers or the carrier. Whenever the appellant earned commission, due service tax was paid.
Held:
The manner or mode of booking profit in the accounts of a commercial organisation has no bearing on the application of section 65(105) to a taxable activity. The term freight is used as consideration for space provided onto the vessel. Appellant contracts for space/slots with carriers by land, sea or vessel and issues a document of title, a bill of lading and commits delivery to a consignee. This activity carried out as principal-to-principal transaction one with the shipper and the other with a carrier are two independent transactions. The surplus arises therefrom and not by acting for a client. Therefore, section 65(19) (business auxiliary service) of the Finance Act, 1994 does not cover such principal-to-principal transactions. Shipping line fails the description of client. The demand of service tax, interest and penalties therefore fail.
