Order Date – 10 August 2023

Parties: M/s Haiko Logistics India Pvt. Ltd. Vs Commissioner of Service Tax- Delhi

Facts –

• The Appellant, M/s Haiko Logistics India Pvt. Ltd., a multi-modal transport operator. The appellant is inter-alia engaged in providing (i) customs clearance services (ii) freight forwarding services and (iii) transportation services.
• Two show cause notices were issued proposing the demand of service tax on mark-up in freight (Ocean freight), on commission income from shipping lines, legal expenses and service tax on difference between the figures in Form 26AS and ST-3 returns and service tax on the value shown as non-taxable in the financial data summary sheet.
• The proposed demands were confirmed except demand with regard to non-payment of service tax on the value shown as non-taxable in the financial data summary sheet and service tax on difference between the figures in Form 26AS and ST-3 returns. Both the appellant and the department filed appeals.

Issue – 

• Whether the appellant is liable pay service tax on demand proposed in SCN?

Order – 

• The Tribunal observed that as regards non-payment of service tax on mark-up in freight income (ocean freight), the appellant also fulfilled all the conditions envisaged in paragraph 2.2 of the Circular dated 12.08.2016 to establish that the appellant was acting on a principal-to-principal basis.
• In terms of paragraph 3 of the Circular dated 12.08.2016, the demand is liable to be set aside as the destination of goods are outside India in terms of rule 10 of the Place of Provision of Service Rules, 2012. For imports, the transaction would be non-taxable in terms of section 66D (ii)(p) of the Finance Act.
• As regards non-payment of service tax on commission income it needs to be noted the appellant was not acting as an agent on behalf of the shipping lines as it bought and sold space on its own account. Thus, it cannot be said that the appellant was acting as a commission agent and thereby, covered under the definition of BAS.
• As regards non-payment of service tax on legal expenses and on difference in figures in ST-3, it was observed that said payments were made by the appellant with interest before the issuance of the show cause notice. Thus, the appellant was entitled to the benefit of section 73(3) of the Finance Act. The demand could not, therefore, have been confirmed.
• With regard to non-payment of service tax on the value shown as non-taxable in the financial data summary sheet, it was observed that the non-taxable amount includes amounts like customs duty, BAF & CAF charges, ocean freight and air freight. All these amount are paid by the appellant on behalf of the client and later on are reimbursed. Thus, same cannot be taxed as they are in nature of reimbursements.
• It has been repeatedly held that no demand can sustain merely on the basis of the difference in figures in ST-3 and Form 26AS as there is difference in the methodology in preparing both the records and Form No. 26AS is not a statutory document for determining the taxable turnover under the service tax provision.