Order Date – 12 December 2023

Parties: M/s. A.G.X. Logistics Private Limited, C.A. Logistics Private Limited Vs Commissioner of GST & Central Excise

Facts –

• The Appellant, M/s. A.G.X. Logistics Private Limited, was found to be collecting ‘ocean freight charges’ from their customer is more than the ocean freight charges paid to the shipping companies.
• The department was of the view that though the appellant collects amounts in the name of freight charges, the amount is inclusive of mark-up, of the difference of actual freight charges paid to the shipping line and freight charges collected, thus the activity would be covered under the definition of service in Section 65B(44) of the Finance Act, 1994 with effect from 01.07.2012.
• A Show Cause Notice was issued for different periods proposing to demand Service Tax on the ocean freight and air freight and the mark-up along with interest and for imposing penalties.

Issue –

• Whether the appellant is required to pay service tax on mark-up received on the freight charges?

Order –

• The Tribunal observed that on perusal of the Annexure to the Show Cause Notice, it is seen that the demand is raised not only on the mark-up but also on the ocean freight and air freight. These charges are not subject to levy of Service Tax during the disputed period. The mark-up received by the appellant on the freight charges is due to the difference in the freight charges collected from the shipper and paid to the shipping / airliners.
• The issue is no longer res integra, the Tribunal in the case of Tiger Logistics held that the activity is trading of cargo space and there is no rendering of service. The demand of Service Tax on mark-up / differential of ocean freight was set aside. 
• Hence it was held that the demand of Service Tax on ocean freight / air freight or the mark-up on the above received by the appellant cannot be subject to levy of Service Tax. The appeals are allowed.