2025-VIL-1363-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax – Demurrage income, Scope of Declared Service, Bundled Service – Demand of service tax on income reported as 'demurrage' - Dept invoked the 'declared service' provision under Section 66E(e) of the Finance Act, 1994, which covers "agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act," to bring the demurrage charges within the purview of service tax - Whether the demurrage charges received by SCI can be considered as a 'declared service' under Section 66E(e) of the Finance Act, 1994, and thus subject to service tax – HELD - The demurrage charges received by the Respondent are linked to the 'transportation of goods by sea', which was admittedly exempted from taxation under the Finance Act, 1994. The ‘demurrage’ is disincentive to delay retention of vessel in port which has cost implication to vessel operator. It is, thus, a contractual arrangement that has everything to do with transport - The 'declared service' provision under Section 66E(e) should be construed narrowly and limited to standalone agreements, and not extended to contingent liabilities arising as part of another service, whether taxable or exempted. The demurrage charges do not fall within the ambit of the 'declared service' and are, therefore, not subject to service tax - the order of the adjudicating authority that had dropped the proceedings on the ground that the demurrage charges were part of the exempt 'transportation of goods by sea' service and, therefore, not subject to service tax, is upheld – The Revenue’s appeal is dismissed
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