Click to Print Click to Close 2017-TIOL-3894-CESTAT-MUM IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH, MUMBAI Case Tracker DHL LOGISTICS PVT LTD Vs CCE [CESTAT] Appeal No. ST/85795/14 Arising out of Order-in-Original No. 6/ST/RN/CM MR/MII/13-14, Dated: 29.11.2013 Passed by the Commissioner of Central Excise, Mumbai-II Date of Hearing: 28.6.2017 Date of Decision: 18.7.2017 DHL LOGISTICS PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE MUMBAI-II Appellant Rep by: Shri Thirumalai Sampath, Adv Respondent Rep by: Shri M P Damle, Asstt. Commr. (AR) CORAM: Ramesh Nair, Member (J) Raju, Member (T) ST - Service Tax demand has been raised and confirmed under the following heads viz. Break bulk fee as CHA service; Freight rebate ass BAS; Airline commission as BAS; Airline incentive as BAS and CCX fee as BAS alsoo CENVAT credit availed allegedly on the basis of documents not in the name of the appellant/different address has been demanded appeal to CESTAT. Held: In view of Tribunal Bangalore decision in appellants own case, demand of service tax under the head of CHA service for the revenuee earned under the head Break Bulk Fee is set aside; as regards freight rebate, the same is a revenue stream generated out of trading of the space in the airline and unless the space is booked by the appellant specifically for a client, the components of Business Auxiliary service do not come into play; the appellant is booking the space for their own trading activities, therefore,
demand under BAS cannot be sustained on freight rebate Airline commission and Airline incentive is an income generated during the course of booking of bulk cargo by the appellant with the airline such activities can, by no stretch of imagination, be considered as BAS since for any service to constitute BAS, at least three parties should be involved in the transaction namely, service provider, service recipient and the client in the instant case there are only two parties in the transaction, the seller of space and buyer of space any commission/incentive received as a result of this transaction of sale cannot be considered as supply of BAS, therefore, demand under the said head is set aside as for demand in respect of CCX fee, SCN does not specifically point out the sub-head under which demand has been raised It is apparent that collection or recovery of cheques, accounts and remittance' is specifically covered under BAS and in view of the same, activity of the appellant of collecting remittances for a fee would fall under the category of BAS demand, therefore, on the revenue streams of CCX is upheld as regards denial of CENVAT credit on the ground that the invoices are not in the name of the appellant, the said stand of the department is upheld and credit is disallowed however, in respect of those invoices wherein the branch office address is shown, credit cannot be denied as SCN does not challenge the receipt and use of the service In conclusion, demand of service tax is confirmed on CCX fee with equal amount of penalty u/s 78 of FA, 1994 and insofar as CENVAT credit is concerned, the same is denied in respect of those invoices which are not at all in the name of the appellant and equivalent penalty to the said extent is imposable Appeal is partly allowed in above terms: CESTAT [para 4.1, 4.2, 4.3, 4.5, 4.6] Case laws cited: Appeal partly allowed DHL Lemuir Logistics Pvt. Ltd. Vs. Commr. of Service Tax, Bangalore 2010 (17) STR 266 (Tri. Bang.) para 2.1 & 4.1 relied upon DHL Logistics Private Limited 2017 (47) STR 309 (Tri.-Mumbai) para 2.2 referred Phoenix International Freight Services Pvt. Ltd. vs. Commissioner of Service Tax Mumbai-II- 2016-TIOL-2353-CESTAT-MUM para 2.5 referred Per: Raju: ORDER NO.A/88448/17/STB This appeal have been filed by M/s. DHL Logistics Private Limited against confirmation of demand of duty invoking extended period and also imposition of penalties. 2. Learned Counsel for the appellant argued that the demand has been raised under following heads: (a) Break bulk fee as CHA service. (b) Freight rebate as Business Auxiliary Service. (c) Airline Commission as Business Auxiliary Service (d) Airline Incentive as Business Auxiliary Service (e) CCX fee as Business Auxiliary Service.
Demand has also been raised for reversal of Cenvat Credit availed by them on the ground that the documents on the basis of which credit was taken or not in the name of the appellant. 2.1 Learned Counsel argued that issue regarding Break bulk free is covered by the decision in their Tribunal and own case DHL Lemuir Logistics Pvt. Ltd. Vs. Commr. of Service Tax, Bangalore reported in 2010 (17) STR 266 (Tri. Bang.). In the said case also service tax was demanded under the category of CHA service for the charges collected as Break bulk fee. He pointed out that in the instant case also demand has been made in respect of amount earned as Break Bulk Fee under the head of CHA Services. The Tribunal in the appellant's own case reported in 2010 (17) STR 266 (Tri. Bang.) has allowed the benefit. 2.2. Learned Counsel argued that demand has been made on the amount earned as Freight rebate under the head of Business Auxiliary Service. He argued that this issue is squarely covered by decision of Tribunal in their own case reported in 2017 (47) STR 309 (Tri.-Mumbai). He particularly relied on para 5 & 7 of the said decision. 2.3. The Ld. Counsel further pointed out that demand has been raised on the amount collected as Airline Commission during the period July 2003 to March 2004. He pointed out that during the subsequent period they have paid service tax under the category of "Business Auxiliary Service". He further pointed out that Airline Incentive and Airline Commission are both received for the service of selling space for the client. He argued that merely selling space does not amount to promoting or marketing service. He argued that they are eligible for certain discount as a matter of industrial practice, trade volume etc. which are passed by the airline to the appellant. These cannot be treated as consideration for provisions of any service. The said incentives are based on the volume of business purchase by the appellant from the airline and in that activity there is no third party or client involved in these payments are in the nature of performance bonus. 2.4. Ld. Counsel pointed out that CCX Fee cannot be made chargeable under the head of Business Auxiliary Service. The appellants collected freight charges and remit the same to the International Airline Company. Fee for such service cannot be charged to test under Business Auxiliary Service. 2.5. Ld. Counsel further pointed out that the said issue is covered in the case of Phoenix International Freight Services Pvt. Ltd. vs. Commissioner of Service Tax Mumbai-II = 2016-TIOL-2353-CESTAT-MUM. He pointed out that they are paying service tax under the head of Business Auxiliary Service since 1.5.2006. The Ld. Counsel argued that the said amount collected would not be covered under the head of Business Auxiliary Service. 2.6. Learned Counsel further argued that credit has been denied on certain documents which are not in the name of appellant or in which the Mumbai address of the appellant has been mentioned. He argued that Revenue has not challenged the receipt and consumption of the service, credit of the same cannot be denied. 2.7. The Ld. Counsel vehemently argued that the entire demand is beyond the normal period of limitation. He pointed out that proceedings on identical issues were held against the appellant in their Bangalore Office. He argued that at the material time the issue was not beyond doubt and therefore extended period of limitation could not have been invoked. 3. Ld. A.R relies on the impugned order.
4. We have gone through the rival submissions. We find that demands have been raised for income earned by the appellant under various Revenue streams. 4.1. The first demand relates to demand of service tax under the head of CHA for the Revenue earned under the head of "Break Bulk Fee". Ld. Counsel has argued that the said issue is covered by the Tribunal decision in the appellant's own case reported in 2010 (17) STR 266 (Tri. Bang.). We find that in the said decision Tribunal has held that demand of service tax for the income under the category of CHA service reads as under: "6. We have gone through the records of the case carefully. The appellants had furnished a flow chart indicating the activities undertake by them. It is seen that the activities in Sl. No. 1 to 6 related to activity of the appellants as freight forwarding. This has been clearly explained by the appellant in the submissions. The point urged was that the appellants are engaged in three distinct activities:- (i) Freight forwarding (ii) Customs House Agent (CHA) (iii) Clearing and Forwarding Agent (CFA) We are of the considered opinion that the activity relating to one of the categories could not be subjected to service tax under other category. In other words, the activities relating to Freight forwarding cannot be brought under CHA. The appellants had clearly explained the nature of the charges collected such as Charge Collect fees, Break bulk fees, Profit share from margin, Unallocated income, Currency adjustment factory, Air/sea Freight reimbursement billing, etc. We do not want to repeat the same in the findings here. Suffice to say, such charges would not be includable in the computation of the service tax towards CHA services. However, the Commissioner in the impugned order even while holding that these charges relate to CHA services, had also repeatedly pointed out that the appellants had not produced a Chartered Accountant's Certificate with regard to the various deductions claimed by them. Hence, while holding that the above charges cannot be included in the value of CHA services, we remand the matter to the Original authority to re-examine the issue after giving an opportunity to the appellants to produce the Chartered Accountant's Certificate in respect of the various deductions claimed by them including the reimbursement. We have also examined the scope of the Customs House Agent (CHA) as defined in the CHA Regulation, 2004. This cannot be ignored even in the matter pertains to service tax as observed to the contrary by the Commissioner in the impugned order. We have clearly held after going through the definition of CHA in the case of Bax Global India Ltd. v. Commissioner of Service Tax, Bangalore [2008 (9) S.T.R. 412 (Tri.-Bang.)] that the activity of CHA relates to entry or departure of conveyances or import of export of goods at any custom station. Therefore activities of CHA is limited to customs station and it cannot extend beyond it. For example, in the present case, the appellants collected air freight for export from the consignee. This activity relates to freight charges collected for transportation service rendered by airliner. In other words, this freight forwarding cannot be said to be activities of Customs House Agent (CHA). In a similar manner, each charge ought to have been examined by the Commissioner. This has not been done. Moreover the Commissioner has confirmed exactly the same amount confirmed in his first Order-in-Original which was set aside by this Bench. The demand of service tax on transportation under the category of CFA is not correct in the light of the various case laws cited by the appellants. The various reimbursement of the taxable services relating to CHA in terms of even the Board's Circular dated June 6, 1997. In these circumstances, even the de novo order suffers from various defects. In the impugned order, the Adjudicating authority has stated that the assessee did not furnish complete accounts duly certified by a Chartered Accountant. Hence we have no
other option but to remand the matter to the Original authority once again for deciding the matter only in respect of the computation of the liability after providing an opportunity to the appellants to produce the Certificate from the Chartered Accountant in respect of every deduction claimed by them. AS regards the demand under CFA services, the appellant had made a strong case for non-includability of rental income, distribution charges, warehousing and transportation. Such charges are collected under separate contracts. They do not represent the charges for CFA services. The case laws relied on are squarely applicable. The commission received by CFA is only subject to service. As regards the includability or non-includability of the various charges, we have already given our findings in this order. That should be borne in mind by the Adjudicating authority. With these observations, we remand the matter to the Original authority for re-computation of the liability. Needless to say that the appellants would cooperate with the Adjudicating authority in providing the Chartered Accountant's Certificate in respect of the deductions claimed by them including the erroneous inclusion of the value of CHA services in the computation of the tax liability in the CFA services. The de novo order should be issued within a period of four months from the date of receipt of this order. The impugned order is set aside and the appeal is allowed by way of remand." Relying on the said decision the demand of service tax under the head of CHA service for the revenue earned under the head of Break Bulk Fee is set aside. 4.2. Demand has been made on service tax under the head of Business Auxiliary Service for the revenue earned as freight rebate. Ld. Counsel has argued that the income is generated as a result of appellants buying cargo space in bulk and selling the same to foreign shipper, he argued that various essential activity in which there is no third party involved except the appellant and the carriers. In these circumstances demand under Business Auxiliary Service cannot be sustain. It is argued that for sustaining demand under BAS, there has to be third party involved in the transaction namely a client. In the absence of any client, no demand under BAS can be raised. We find substantial force in the argument of Ld. Counsel, the freight rebate is a revenue stream generated out of trading of the space in the airline incentives. Unless the space is booked by the appellant specifically for a client the components of the Business Auxiliary Service do not come into play. In the instant case, there is no such allegation and the appellants are booking the space for their own trading activities. In these circumstances demand of service tax under BAS cannot be sustained and the same is set aside. 4.3. The next issue is relates to the income under the head of airline commission and airline incentive sought to be taxed under BAS. It is seen that the said income is generated during the course of booking of bulk cargo by the appellant with the airline. The appellant have received the incentive and commission from the airline. The appellants are engaged in buying and selling of space in the airline and depending on the volume of the space bought by the appellant from the airlines they received the commission/incentive. The appellants are not buying and selling space on the airline on behalf of their client but on their own behalf. To consider the activity of buying and selling the taxable activity under the head of BAS, the same should be done on behalf of the client. Thus, if the appellants were selling the space on carrier from the airline directly to the exporters without themselves purchasing the space then it could have been considered as an activity involving promotion of sales. In the instant case the appellant are directly buying themselves and thereafter selling the same to the exporters. In this activity they are receiving incentive and commission based on the total space purchase by them from the airline. This activities can be no stretch of imagination by considered as BAS as for any service to statute the BAS at least three parties should be involved in the transaction namely the service provider, service recipient and the client. In the instant case there are only two parties in the transaction, the seller of space and the buyer of space. Any commission/incentive received, as a result of this transaction of sale cannot be considered as supply of BAS.
In view of above, the demand under the head of BAS for the Revenue generated as airline/airline incentive is set aside. 4.5. Ld. Counsel pointed out that the appellant get the CCX Fee when they handled freight to collect shipment and when they collect and remit the freight amount from the consignee to the international airline company and undertake other related formalities under foreign exchange remittance etc. Ld. Counsel argued that the demand has not been raised under any specific sub-head of the BAS and on that count itself, the demand is liable to be set aside. Ld. Counsel pointed out that w.e.f. 1.5.2006 they have started paying service tax on the same under BSS. He has also pointed out that the decision in the case of Phoenix International Freight Services Pvt. Ltd. (supra) does not apply as the appellant in the said case had not contested the liability voluntarily. We find that the show cause notice does not specifically pointed out the sub-head under which demand has been raised for the Revenue generated as CCX fee. The definition of BAS at the material time read as under: 65. Definition In this Chapter, unless the context otherwise requires, "(19) "business auxiliary service" means any service in relation to; (i) promotion or marketing or sale of goods purchased or provided by or belonging to the client, or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) any incidental or auxiliary support service such as billing, collection or recovery of cheques, accounts and remittance evaluation of prospective customer and public relation services. And includes service as a commission again, but does not include any information technology service. Explanation For the removal of doubts, it is hereby declared that for the purposes of this clause "information technology service" means any service in relation to designing, developing or maintaining of computer software, or computerized data processing or system networking, or any other service primarily in relation to operation of computer systems." It is apparent that "collection or recovery of cheques, accounts and remittance is specifically covered under BAS. In view of that activity of collecting remittances by the appellant for a fee would fall under this category of service as BAS. In view of above, the demand of service on the Revenue streams of CCX Fee is upheld. 4.6. The next issue before us is relating to the Cenvat credit taken on the documents which are not in the name of the appellant. While some of the documents are indeed not in the name of the appellant three documents of Mancon India Services Pvt. Ltd. are in the name of M/s. Excel India Private Limited and contained the address of Mumbai. Excel India Pvt. Ltd. being the original name of the appellant. The documents are addressed to- (1) 8 th Floor, Oberoi Arma, A.K. Marg, Bandra (E), Mumbai 51
(2) 6 th Floor, Leela Galleria, Andheri-kurla Road, Marol, Andheri East, Mumbai 400059, (3) K-1/124, Chittaranjan Park, New Delhi, Delhi 110048. It is seen that in respect of these invoices the only error is that instead of the appellant address at Gurgaon, the address of Mumbai is mentioned. The show cause notice seeks to deny credit on the ground that these addresses are not disclosed under the list of Branch Officers. Show cause notice does not challenge the receipt of use of the service. Since, the invoices are in the name of appellant themselves and the receipt of service by the appellant have not challenged, credit on the same cannot be denied merely because of a different address being shown. However, in so far as invoices at Sr. No. 1 & 2 are concerned the same are not at all in the name of the appellant and the credit of the same cannot be allowed. Penalty in respect of wrongly availed credit would be revised to the amount of reversal confirmed in the order above. The penalty on the demand of service tax under Section 78 would be limited to the demand of service tax made and CCX Fee in respect of which duty has been confirmed. The appeal is partly allowed in above terms. (Pronounced in court on 18.7.2017) (Paragraph number as per certified copy Editor) (DISCLAIMER: Though all efforts have been made to reproduce the order correctly but the access and circulation is subject to the condition that Taxindiaonline are not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.)