In Service Tax Appeal No. 52168 of 2016-CESTAT- CESTAT (Delhi) holds that differential in ocean freight charged by the appellant cannot be considered as a service and therefore, not liable to Service Tax
Members Dilip Gupta (President) & Hemambika R Priya (Technical) [01-05-2023]

Read Order: M/s. Balmer Lawrie & Co. Ltd v. The Commissioner of Service Tax

Chahat Varma

New Delhi, May 2, 2023: The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), while dismissing the departmental appeal and allowing the appeal filed by Balmer Lawrie & Co. Ltd. (appellant) has held that differential in ocean freight charged by the appellant cannot be considered as a service and therefore, the appellant was not liable to pay service tax on it.

In the present case, the appellant had entered into a contract with Indian customers for transporting and delivering the cargo at the desired destination within India. The investigations had revealed that the appellant provided cargo handling services both within and outside India. The counsel for the appellant submitted that the remittances made to the non-resident service providers were reimbursement of freight charges incurred in non-taxable jurisdiction, and therefore, was not liable for service tax. On the other hand, department argued that since the foreign associate provided taxable services on behalf of the appellant and they were not residents in the taxable territory of India, the appellant was liable to pay service tax on the differential value as consideration for business auxiliary service under reverse charge mechanism.

The coram of Dilip Gupta (President) and Hemambika R Priya (Technical) placed reliance on M/s Tiger Logistics (India) Ltd. vs Commissioner of Service Tax-II, Delhi [LQ/CESTAT/2022/142], wherein it was held that the differential in ocean freight charged by the appellant is a business in itself on account of the appellant and cannot be called a service at all. Neither can the profit earned from such business can be termed consideration for service and therefore, the appellant was not liable to pay service tax.