Commission received from container liners for providing service taxable as business auxiliary service

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The appellant received commissions from container liners for providing services to them, According to the Revenue, such services falls under the head “Business Auxiliary Services” w.e.f. 09.07.2004. The appellants herein were neither registered to provide services under this head nor paid service tax on such commissions. Show cause notices were issued demanding difference service tax along with interest under section 75 and penalty was also proposed to be imposed under sections 76 & 77 of Finance Act, 1994.

The appellant contended that he received the commissions from the Container Liners and after hearing the contentions of both sides, proceeded to decide whether the amounts received from the container liners as commission, is liable for Service Tax under “Business Auxiliary Services” or not. He further concluded that the commissions received by the assessee and the services provided by him fall under the definition of “Steamer Agent” as the nature of services “to book, advertise or canvass for cargo for or on behalf of a shipping line”.

The Adjudicating Authority held that the services provided by the assessee would fall under the category of ‘Business auxiliary service’. In the field of international containers shipping, there are shipping lines who own and run the ships and there are container lines who own containers and rent them out to importers or exporters. Containers leave a Port in a ship and are unloaded at another Port while ship moves on. After being unloaded, container is booked by another client and moves in another ship to enter another Port and so on. Thus, containers move independent of the ships. The container lines are different from shipping lines which runs the ships. In view of the statutory definition given to the “Steamer Agent Services” under the Service Tax Act, we do not find that the services rendered to container lines can also be included under this definition. Therefore, it falls more correctly under the business auxiliary services.

Citation: [2018] 96 taxmann.com 319 (Hyderabad – CESTAT)