02-02-2022 – Selling of Cargo Space by a Clearing and Forwarding agent is merely trading of Space and does not amount to support service of business and commerce

The Hon’ble CESTAT, Mumbai vide its Final Order No. A/85046-85047 dated 27.01.2022 in the matter of M/s Bhatia Shipping Private Limited v. Commissioner of Service Tax – I, Mumbai in Service Tax Appeals No. 88100 and 88102 of 2019 held that the selling of Cargo Space by a Clearing and Forwarding agent is not a support service of business and Commerce.

Facts – The Appellant is engaged in the business of freight forwarding, clearing and forwarding and other allied activities that involve booking of Containers/Air Cargo with various shipping lines/Airlines for their customers (importer/exporter of goods). The Appellant pays charges for cargo space booking to different Shipping lines/Airlines and later on sell such space to the importer/exporter at slightly higher rate, the differential amount which the Appellant recovers is being termed as ‘mark-up’.

The Department was of the view that such ‘mark-up’ was for services provided by the Appellant to customers and taxable under service category “support services of business or commerce” covered under Section 65(104) of Finance Act, 1994. Even after introduction of Negative list regime w.e.f. 01 July 2012, department was of the view that since this activity is not covered in the negative list of services, it continues to remain taxable under Service tax.

Appellant’s Plea – The Appellant submitted that the issue has already been decided by division bench of Hon’ble Tribunal in favour of the Appellant in the matter of Satkar Logistics bearing Service Tax Appeal no. 52534/2015) vide Order dated 21.08.2018.

Respondent’s Plea – On the other hand, the Authorized Representative for the Department placed reliance on Bhuvaneswari Agencies (P) Ltd. v. Commissioner of Central Excise, Bangalore, reported in 2007 (8) STR 167 (Tri. – Bang.) and D. Pauls Consumer Benefit Ltd. v. Commissioner of C. Ex., New Delhi, reported in 2017 (52) S.T.R. 429 (Tri. – Del.)  and contended that the impugned orders do not suffer from any illegality.

Held – The Hon’ble CESTAT, Mumbai after considering the submissions, facts and law applicable held that in the matter of Satkar logistics, the divisional bench observed that the issue involved in Appeal is covered by the decision of Tribunal in Greenwich Meridian Logistics (India) Pvt. Ltd.  v. Commissioner and Commissioner of Service Tax v. Karam Freight movers and accepted the contention of the Appellant that the Appellant was only trading in space and was not providing any service. The aforesaid decision dated 21.08.2018 in the matter of Satkar logistics was subsequently followed by the Divisional Bench in the matter of Satkar Logistics v. Commissioner of Service Tax, Delhi – III.

The Hon’ble CESTAT with above findings and distinguishing the judgments referred by the Revenue (as already overruled by Larger Bench) set aside the impugned order and allowed both the appeals of the Appellant.

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