2026-VIL-1162-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax liability on markup in purchase and resale of cargo space by freight forwarders - Whether the markup earned by a freight forwarder on the purchase and resale of cargo space on a principal-to-principal basis constitutes taxable consideration for Business Support Services or whether such markup represents mere business profit arising from trading in cargo space which is not taxable as a service – HELD - Firstly, profit is the basic motive in any buying and selling transaction and cannot, merely by virtue of a markup, be converted into a taxable service. The Respondent assumes without any evidence or substantiation that the markup arises from rendering of ancillary services such as local transportation, cargo handling and facilitation charges, which allegation is wholly baseless - Respondent takes contradictory stands, on one hand claiming the Appellant is not a pure agent because of the markup, and on the other hand claiming the markup itself represents the value of services rendered - Where services are bundled, the main service of ocean transportation is not taxable either before or after 01.07.2012 in view of the statutory provisions and CBIC circulars. The Appellant operates as a principal and not as an intermediary, as it purchases cargo space in bulk on its own account and bears the risk of non-utilization of unsold space, unlike an agent who would merely facilitate transactions - The buying and selling of cargo space on a principal-to-principal basis does not amount to rendering a service and any profit earned through such transactions is not leviable to Service Tax - The impugned Order-in-Original is set aside and the appeal is allowed
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