2008 (7) TMI 139 - AT - Service Tax

Business auxiliary services - whether the amount collected by appellant from their clients cargo owners as consideration for arranging space in aircrafts belonging to the airlines is exigible to service tax to the extent such amount is over and above the amount paid by them to the airlines for such space - appellants have not made out prima facie case against the demand of service tax on this differential amount - that the appellants cannot claim any support to their plea of time-bar

Summary

Issues:
1. Demand of service tax and penalties for the period 1-7-2005 to 30-9-2006 under 'Business Auxiliary Services'.
2. Liability of appellants as commission agents for the sale of cargo space in aircrafts.
3. Payment of service tax on commission and overriding commission.
4. Applicability of time-bar plea based on DGST's order.
5. Requirement of pre-deposit by the appellants.

Issue 1: Demand of service tax and penalties under 'Business Auxiliary Services'
The Commissioner demanded service tax and penalties from the appellants for the period 1-7-2005 to 30-9-2006 under the category of 'Business Auxiliary Services'. The appellants paid a portion of the demanded amount during investigations but did not make these payments under protest. The appellants cannot claim a prima facie case against the demand on merits, although they can argue limitation against the extended period. The learned Jt. CDR argued that the appellants should have paid service tax based on an order issued by the Director-General of Service Tax in 2005, classifying air cargo agents as liable to pay service tax as commission agents under 'business auxiliary services'.

Issue 2: Liability of appellants as commission agents
The appellants, acting as "general sale agents" of airlines, were entitled to commission and overriding commission for arranging space in aircrafts for cargo owners. The question arose whether the amount collected by the appellants from clients for space in airlines' aircrafts is subject to service tax. The appellants did not pay service tax on the overriding commission. The Tribunal noted that the appellants were treated as commission agents by the airlines. The appellants failed to establish a prima facie case against the demand for service tax on the differential amount collected from clients.

Issue 3: Payment of service tax on commission and overriding commission
The appellants paid service tax on the commission but not on the overriding commission. The Tribunal found limited evidence of payment of service tax on the commission. The learned Consultant acknowledged that service tax was not paid on the overriding commission. The Tribunal concluded that the appellants were liable to pay service tax on the differential amount collected from clients for arranging space in airlines' aircrafts.

Issue 4: Applicability of time-bar plea based on DGST's order
The appellants raised a time-bar plea based on the DGST's order classifying air cargo agents as liable to pay service tax. However, the Tribunal rejected this argument, stating that the order was issued during the extended period of limitation and was not set aside by any competent court. The withdrawal of the Hon'ble High Court's direction did not affect the validity of the DGST's order. Therefore, the appellants could not rely on the withdrawal of the High Court's direction to support their time-bar plea.

Issue 5: Requirement of pre-deposit by the appellants
Considering the facts and circumstances, the Tribunal directed the appellants to pre-deposit a reasonable amount above what was paid during the investigative stage. The appellants were instructed to deposit Rs. 10,00,000 within four weeks. Compliance would lead to a waiver of pre-deposit and stay of recovery concerning interest, penalties, and the remaining tax amount.

This detailed analysis of the judgment addresses all the issues involved comprehensively, providing an in-depth understanding of the legal aspects and decisions made by the Appellate Tribunal CESTAT, CHENNAI.