Service Tax on the Retention of Freight Amount

The central issue in this case revolved around the applicability of service tax on the retention of freight amounts, specifically the profits retained by the taxpayer in freight trading. The tax department contended that this activity fell under the purview of service tax, classified as Business Auxiliary Service prior to July 1, 2012, and as a taxable ‘service’ under the Negative List regime thereafter.

Consequently, the tax authorities issued four Show Cause Notices (SCNs) to the taxpayer, seeking a total service tax payment of Rs. 13.00 crores, covering the period from 2010-11 to June 2017. The first notice, issued in October 2015, invoked the extended period of limitation.

In the initial round of adjudication, the Commissioner upheld the demands raised by the first three SCNs until the date of the Order. The taxpayer challenged this decision in the Hon’ble High Court of Bombay. The High Court, in a comprehensive judgment, set aside the contested Order. It acknowledged various relevant judgments on the matter and remanded the case back to the Commissioner for a fresh adjudication in accordance with the observations and directives provided in its judgment.

Upon re-adjudication, the Commissioner, through a comprehensive and detailed Order, has completely absolved the taxpayer from any liability, taking into account the jointly submitted written statements and the authoritative legal precedents cited and relied upon therein.

We have attached a copy of the Order-in-Original, dated September 28, 2023, and issued on October 3, 2023, by the Commissioner for your reference.