The Chennai Bench of Customs, Excise & Service Tax Appellate Tribunal in the case of M/s. Indo Lloyd Freight Systems Pvt. Ltd. v. CST, Chennai held that incentive for booking space for cargo with shipping lines does not amount to the commission.
The appellant in the present case is a registered Customs House Agent in the business of import, export, forwarding and consolidation in relation to goods exported/ imported by air and sea and other incidental process and registered under the category of custom house agent for the purpose of service and is discharging Service Tax under this category. They also book space for cargo with shipping lines for which they are paid an incentive of 2% of the basic freight.
The issue before the Tribunal was regarding the incentives received from various airline/ shipping liners @ 2% of the basic freight were chargeable to Service Tax or not.
It was contended by the appellant that there is no service provider and service receptionist relationship between the appellant and the shipper liner. The appellant has rightfully discharged service tax on the commission received as custom house agent and this incentive does not amount to the commission since the appellant does not communicate with the shipping liner as a steamer agent but is exclusively appointed by the shipping liner for the services.
It was contended by the revenue that any person who is engaged in the activity of such transportation of cargo would be rendering the service of steamer agent even though they have been registered as a customs house agent.
The Tribunal bench comprising of Judicial Member Sulekha Beevi C.S. and Technical Member Madhu Mohan Damodhar relying upon a decision and clarifications issued by the department went on to hold that even if such activity is considered as ‘Business Auxiliary Services’ as they promote the taxable services of other people, the secondary service providers are not taxable. The appellant has no obligation to arrange transport of cargo through a particular shipper liner and hence the amount received cannot fall within the category of ‘commission’ or be subjected to levy of Service Tax.
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