2018 (2) TMI 320 - AT - Service Tax

Business Auxiliary Services - activities of booking domestic and international air cargo for various airlines for rendering the said bookings - Department took the view that the assessee were paying service tax under Business Auxiliary Service only on the commission amount without considering the incentive amount - Held that - reliance placed in the case of Suraj Forwarders Vs Commissioner of Service Tax, Ahmedabad 2014 (4) TMI 1169 - CESTAT AHMEDABAD , where it was held in favor of the assessee noting that mere sale and purchase of cargo space and earning profit in the process is not a taxable activity and that commission earned by the assessee while acting on behalf of the exporter and mark-up value was of freight charges are not to be considered as commission - demand set aside - appeal allowed - decided in favor of appelalnt.

Summary

Issues:
1. Service tax liability on commission and incentive amount paid by cargo handling service provider.
2. Interpretation of freight difference as commission earned for promoting an airline.
3. Determination of service tax liability on transactions between cargo handling service provider and airlines/customers.
4. Application of CBEC circulars and judicial precedents in deciding service tax liability.

Issue 1:
The case involved appeals regarding the service tax liability of M/s. Skylift Cargo (P) Ltd., engaged in cargo handling services, clearing & forwarding, and customs house agent services. The Department alleged that the assessee was paying service tax only on the commission amount, excluding the incentive amount received from airlines. Show-cause notices were issued, resulting in demands for differential service tax liability, penalties, and interest. The assessee contended that the incentive amount represented freight difference, not earned for promoting airlines, but as profit from selling cargo space to customers. The assessee argued that they acted as a principal in the transactions, providing services to exporters, not promoting airlines.

Issue 2:
The Tribunal referred to the decision of the Hon'ble High Court of Delhi and various Tribunal decisions, including the case of M/s. Karam Freight Movers, to determine the service tax liability. The Tribunal held that the mere sale and purchase of cargo space for profit is not a taxable activity under the Finance Act, 1994. It was established that the commission earned by the assessee while acting on behalf of exporters and the mark-up value of freight charges should not be considered as commission. The Tribunal dismissed the Revenue's appeal, upholding the assessee's argument that the incentive amount was not earned for promoting airlines but as profit from transactions as a principal.

Issue 3:
The Tribunal also considered the assessee's argument that subsequent notices by the Department had taken a different stand on the issue, demanding service tax only on the difference amount. The Tribunal observed that the Department's own actions in subsequent cases supported the assessee's position. The Tribunal relied on CBEC circulars and judicial precedents to conclude that the impugned orders could not be sustained, setting them aside and allowing the appeals of the assessee. The Department's appeal was dismissed, and all appeals were disposed of accordingly.

Issue 4:
The Tribunal's decision was based on established legal principles and precedents, emphasizing that the service tax liability should be determined based on the nature of the transactions and the actual services provided by the assessee. The Tribunal's analysis of the facts, supported by relevant case laws and circulars, led to the conclusion that the incentive amount received should not be considered as commission for promoting airlines. The judgment highlighted the importance of consistent application of legal principles and precedents in deciding tax liabilities in such cases.