T.K. Jayaraman, Member (T)

1. This appeal has been filed against the Order-in-Original No. 22/2006 dated 18.05.2006, passed by the Commissioner of Service Tax, Bangalore

2. The appellants are, inter alia engaged the business of customs house agent, freight forwarders and execution of shipments either by air imports or air exports. The Commissioner of Service Tax, Bangalore initiated proceedings against the appellants by issue of Show Cause Notice dated 17.08.2005 for the period from 2000 - 2004 on the ground that the appellants had not declared the entire value of the taxable services rendered by them to their clients. On conclusion of the adjudication proceedings, he confirmed service tax amounting to Rs. 3,61,87,280/-. He imposed a penalty of Rs. 200/-per day under Section 76 of the Finance Act, 1994 and a penalty of Rs. 6 Crores under Section 78 of the. The appellants are highly aggrieved over the impugned order. Therefore they have come before this Tribunal for relief.

3. Shri G. Shivadass, learned Advocate appeared on behalf of the appellants and Shri R.P. Raheja, learned Jt. CDR for the Revenue.

4. We have heard both the sides. The learned Advocate brought to our notice that for the period from 2001 - 2003, the Department issued a Show Cause Notice dated 17.09.2003 on the same grounds and the Original Authority confirmed the demand of service tax on the appellants. However the appellants approached the Commissioner (Appeals) and the Commissioner (Appeals) allowed the appeal of the appellants by dismissing the Order-in-Original. It was pointed out that this Order-in-Appeal granting relief to the appellants had not at all been appealed by the Department. Hence he contended that the Order-in-Appeal passed earlier has become final and the Revenue cannot re-agitate the issue. He placed reliance on the following decisions of the Honble Apex Court:

(i) Indian Oil Corporation Ltd. v. CCE 2006 (202) E.L.T. 37 (S.C.)

(ii) Birla Corporation Ltd. v. CCE

(iii) Jayaswals Neco Ltd., v. CCE 2006 (195) E.L.T. 142 (S.C.)

(iv) Supdt of Central Excise v. DCI Pharmaceuticals P. Ltd. 2005 (181) E.L.T. 189 (S.C.)

The learned Advocate explained that the appellants apart from rendering service as Customs House Agents render various other services relating to imports and exports to their clients. They are also freight forwarders. Therefore the Department has sought to tax on all the amounts collected by the appellants from their clients. He said, that is not the right approach. He urged the point that the appellants had already paid service tax on the amounts collected by them towards rendering services of Customs House Agents. They cannot be asked to pay tax on various amounts collected by them for other activities which do not fall under the category of CHA service. He said that the services provided to the clients fall under three categories. Certain services are provided by the third party and the appellants initially paid the amount to the third party on behalf of the clients and later collected the same from them. In these cases, the appellants do not render any service at all to the clients. The services are rendered by the third parties. Therefore, the appellants cannot be made liable to pay service tax on these activities which do not relate to the services rendered by the Customs House Agents. In this category, the following charges can be included.

1) Freight revenue

2) Cartage revenue

3) MSIL/JWG charges

4) Due carrier charges

5) Liner charges

6) Examination charges

7) DO fee

8) Bill of Lading fee

9) CFS charges.

All these charges do not pertain to service provided by the appellants and therefore, they are not taxable in the hands of the appellants. It was also urged that the second set of services for which charges are collected by the appellants. These charges are sought to be taxed in the present impugned order. These are charges for the services provided by the appellants to the client. In these cases, there is no agency function. The appellants do not act as an agent of the client in relation to anybody in carrying out these services. These services are provided by the appellants to the clients directly. This set of charges consists of those described in the Show Cause Notice as Charges Collect Fee, Currency Adjustment Fee (CAF) and Storage and Warehousing Charges. These are charges for the services provided to the clients in relation to transportation and delivery of cargo. These services are not provided by the appellants as an agent of the clients in a custom station in relation to import or export of cargo or arrival or departure of conveyance in the Customs Station and are therefore not taxable as Customs House Agent services.

5. As regards the third categories, namely, services of Storage and Warehousing, these services for the first time came under the service tax net only with effect from 16.8.2002. Therefore for a period prior to this date, these services are not taxable.

6. Most of the charges collected by the appellants are actually reimbursable in nature. This was explained earlier. Certain charges are collected from the clients and the appellants initially incurred expenditure. Sometime it happens that the expenditure incurred by the appellants is less than the amount collected. Therefore some profit is made in respect of certain activities. The. Revenue has sought to levy service tax on these activities also. It was pointed out that this cannot be done since these charges do not relate to the services rendered in the capacity of Customs House Agent. The learned Advocate relied on the decision of the Supreme Court in the case of Baroda Electric Meters Ltd. v. Collector of Central Excise .

7. The learned Jt. CDR took us through the Order-in-Original and said that all the charges dealt with in the Order-in-Original were not dealt with in the earlier order of the Commissioner (Appeals) and therefore it cannot be said that the same issue which has been decided earlier is the subject matter of the impugned order.

8. Reacting to the learned Jt. CDRs submission, the learned Advocate took us to the various details of the activities sought to be taxed and the various amounts collected by them and made the point that the maximum amount sought to be taxed relates to freight and the Order-in-Appeal has already decided that freight is not relatable to the customs house agent activity and therefore, it cannot be said that the matter was not decided earlier.

9. On a very careful consideration of the issue, we find that the appellants apart from the activity of the Customs House Agent undertake work as freight forwarders and other activities related to that. We have perused the details of the billing for their entire period under dispute. It is broadly categorized in the following way. The charges are relating to:

1) Air exports

(2) Air imports

(3) Ocean exports

(4) Ocean imports

(5) Customs clearance

(6) Logistic.

For example, in respect of Air exports, for the year 2000 - 2001 the Freight revenue is of the order of 8.8 crores. That means, this amount represents the freight collected by the appellants towards air freight for the customers and then paid to the airliners. This amount has also been sought to be taxed under the Customs House Agent activity. This shows the adjudicating authority has not applied his mind to the details of the various activities undertaken by the appellants and how they relate to the amount collected by them. In respect of air exports apart from freight, they collected various other charges i.e. Cartage revenue, MSIL / JWG charges, due carrier, documentation, etc. In all these cases the services are rendered by the third party and the appellants initially make payment for the activities on behalf of the client and later collect the amount from the clients. These are actually reimbursable expenses and they do not relate to any CHA activities. In these cases, on going through the statement, we find that in certain cases the appellants had incurred less cost and in certain cases, they had incurred more cost. In any case, the profit or loss incurred in respect of activities which are not related to CHA activities should not be the concern of the Department for the purpose of collecting service tax. The Apex Courts decision in Baroda Electric Meters Ltd case (supra), even though it relates to the Central Excise, has definitely a bearing on this. If the appellant performs an activity which is not related to the customs house agent, then service tax cannot be levied on that activity under the category of CHA services. Similarly, we have seen the break up of all other services. It was already pointed out by the appellants that in certain eases, the appellants directly render certain services which do not relate to CHA and they collect fees directly from the clients. These charges are charges collect fee, DO fee, Currency Adjustment Fee, Cartage revenue, etc. The appellants have clearly explained the nature of each of these charges. The Commissioner has not discussed the nature of each of the charges and given a finding whether it relates to CHA services: The definition of CHA as given in the Finance Act, 1994, Section 65(35) reads as follows:

(35) "Customs House Agent" means a person licensed, temporarily or otherwise, under the regulations made under Sub-section (2) of Section 146 of the Customs Act, 1962 (52 of 1962);

105 (h) to a client, by a custom house agent in relation to the entry or departure of conveyance or the import or export of goods;

Regulation 2(c) of the Customs House Agents Licensing Regulations, 2004 defines customs house agent as under:

(c) "Customs House Agent" means a person licensed under these regulations to act as agent for the transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any Customs Station.

When we carefully go through the definition of the customs house agent, we find that the activity of the CHA relates to the entry or departure of conveyances or import or export of goods at any Customs station. Therefore the activity of the CHA is limited to the Customs Station. It cannot extend beyond it. For example, in the present case, the appellants collect air freight for export from the clients, but before collection he pays from his pocket to the Airliner. Thus this activity relates to transportation from a port in India or from a place in India to any other place in a foreign country. These freight charges cannot be said to be related to the activity of the CHA. In any case, the air freight fee is for a passage beyond India. This service is also not rendered by the CHA. The freight charges collected is for the transportation of the goods and the transportation service is rendered actually by the Airliner and not the CHA. These points have not been properly gone through by the adjudicating authority. Similarly if we see the breakup of other services, they do not relate to CHA activity at all. Further we find that storage and handling charges came into the service tax net only with effect from 16.8.2002. In these circumstances, we are of the opinion that there is no merit in the impugned order. Moreover as contended by the learned Advocate, the major amount portion of the Billing represents freight charges and the Commissioner (Appeals) had already decided the issue in favour of the appellants. The order of the Commissioner (Appeals) has not been challenged by the Revenue. In such circumstances, we agree with the learned Advocate for the appellants that the Revenue cannot agitate over the issue which has become final. The demand is also time barred in view of the above observation, we are of the view that the impugned order is not sustainable. Summing up, we find that the appellants had already discharged the duty liability in respect of the Customs. House Agent activities undertaken by him. As regards all the other activities, we find that they do not relate to customs house agent activities. Even if any profit has been made in respect of those activities, they cannot be subjected to service tax in view of the Apex Court decision in the Baroda Electricity Meters Ltd. case (supra). In fine the demand is not sustainable. There is no justification for imposition of any penalty. We set aside the impugned order and allow the appeal with consequential relief.

(Pronounced in the open court 25 OCT 2007)