Custom house agent

CESTAT, BANGALORE BENCH

BAX GLOBAL INDIA LTD.

v.

COMMISSIONER OF SERVICE TAX, BANGALORE

DR. S. L. PEERAN, JUDICIAL MEMBER

AND T. K. JAYARAMAN, TECHNICAL MEMBER

FINAL ORDER NO. 1205 OF 2007

AND SERVICE TAX APPEAL NO. 233 OF 2006

OCTOBER 25, 2007

Section 65 of the Finance Act, 1994 - Customs house agent - Period 2000 to 2004 - Assessee was a customs house agent and discharged service tax on services provided by it - Apart from activity of customs house agent assessee had also undertaken work as freight forwarders and other activates related to that and collected charges for that - Revenue demanded service tax on all such charges collected by assessee - Whether charges collected by assessee towards, cartage revenue, MSIL/JWG charges, due carrier, documentation etc. in respect of which services were rendered by third party and assesses initially make payment for activities on behalf of client and later collect amount from clients with not be covered under activities of CHA - Held, yes - Whether air freight collected by assessee which were relating to transportation from a port in India or from a place in India to any other place in a foreign country will not be covered under activity of CHA - Held, yes - Whether since storage and handling charges came into service tax net only with effect from 16-8-2002, charges collected by assessee towards that will not be taxable - Held, yes - Whether therefore demand raised by revenue on above charges collected by assessee was to be set aside - Held, yes

FACTS

The assessee was inter alia engaged the business of costoms house agent, freight forwarders and execution of shipments either by air imports or air exports. The Commissioner initiated proceedings against the assessee by issue of show cause Notice dated 17-8-2005 for the period from 2000-2004 on the ground that assessee had not declared the entire value of the taxable services rendered by it to its clients. On conclusion of the adjudication proceedings, he confirmed service tax demand alongwith penalties.

On appeal:

HELD

The assessee apart from the activity of the Customs House Agent had undertaken work as freight forwarders and other activities related to that. The details of the billing their entire period under dispute, was broadly categorized in the following way. The charges were relating to: (1) Air exports (2) Air imports (3) Ocean exports (4) Ocean imports (5) Customs clearance (6) Logistic. For example, in respect of Air exports, for the year 2000-2001 the Freight revenue was of the order of 8.8 crores. That means, this amount represents the freight collected by the assessee towards air freight for the customers and then paid to the airliners. This amount had also been sought to be taxed under the Customs House Agent activity. This shows the adjudicating authority had not applied his mind to the details of the various activates undertaken by the assessee and how they relate to the amount collected by assessee. In respect of air exports apart from freight, it collected various other charges i.e. Cartage revenue, MSIL/JWG charges due carrier, documentation, etc. In all these cases the services were rendered by the third party and the assessee initially make payment for the activities on behalf of the client and later collect the amount from the clients. These were actually reimbursable expenses and did not relate to any CHA activities. In these cases, on going through the statement, it was found that in certain cases the assessee had incurred less cost and in certain cases, it had incurred more cost. In any case, the profit or loss incurred in respect of activities which were not related to CHA activities should not be the concern of the Department for the purpose of collecting service tax. The Apex Court’s decision Baroda Electric Meters Ltd. v. CCE 1997 (94) ELT 13, even though it related to the Central Excise, had definitely a bearing on this. If the assessee performs an activity which was not related to the customs house agent, then service tax cannot be levied on that activity under the category of CHA services. Similarly, the break up of all other services had been seen. It was already pointed out by the assessee that in certain cases, assessee directly render certain services which did not relate to CHA and it collected fees directly from the clients. These charges were ‘charges collect fee’, ‘DO fee’, ‘Currency Adjustment Fee’, ‘Cartage revenue’, etc. The assessee have clearly explained the nature of each of these charges. The Commissioner had not discussed the nature of each of the charges and given a finding whether it relates to CHA services.

The activity of the CHA relates to the entry or departure of conveyances or import of export of goods at any Customs station. Therefore the activity of the CHA is limited to the Customs Station. It cannot extend beyond it. For exampled, in the instant case, the assessee collected air freight for export from the clients, but before collection he paid from his pocket to the Airliner. Thus this activity related to transportation from a port in India or from a place in India to any other place in a foreign country. These freight charges couldnot be said to be related to the activity of the CHA. In any case, the air freight fee was for a passage beyond India. This service was also not rendered by the CHA. The freight charges collected was for the transportation of the goods and the transportation service was rendered actually by the Airliner and not the CHA. These points had not been properly gone through by the adjudicating authority. Similarly if the breakup of other services was seen, they did not relate to CHA activity at all. Further storage and handling charges came into service tax net only with effect from 16-8-2002. In these circumstances, was no merit in the impugned order. The demand was also time barred. In view of the above observation, the impugned order was not sustainable. Summing up it was found that the assessee had already discharged the duty liability in respect of the Customs House Agent activities undertaken by him. As regards all the other activities, it did not relate to customs house agent activities. Even if any profit had been made in respect of those activities, it could not be subjected to service tax in view of the Apex Court decision in the Baroda Electric Meters Ltd.’s case (supra). In fine the demand was not sustainable. There was no justification for imposition of any penalty. The impugned order was to be set aside and the appeal was to be allowed. [Para 9]