2018 (3) TMI 113 - AT - Service Tax

Levy of Service tax - commission paid to them by airlines for booking cargo space - whether the appellants are liable to pay service tax on the rebate / incentive received from exporters / clients for booking space for cargo? - Held that - similar issue decided in the case of M/s. Skylift Cargo (P) Ltd. Versus Commissioner of Service Tax, Chennai And (Vice-Versa) 2018 (2) TMI 320 - CESTAT CHENNAI , where it was held 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 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on rebate/incentive received from exporters/clients for booking cargo space.

Analysis:

Issue 1: Liability to pay service tax on rebate/incentive received from exporters/clients for booking cargo space

The case involved appellants who were IATA approved Freight Forwarding Agents registered under Custom House Agent Service and Business Auxiliary Service. The Service Tax Department conducted investigations suspecting non-payment of service tax on charges like brokerage, discount, commission, and incentives. The original authority confirmed the demand of service tax along with penalties under Sections 76 and 78 of the Finance Act, 1994. The appellants challenged this before the Tribunal.

The appellants argued that the commission/incentive/rebate received from airlines should not be subject to service tax as it represented freight margin recovered from exporters for services rendered as a carrier. They highlighted the tripartite agreement between Airlines, IATA, and Cargo agents, emphasizing their role in accepting cargo from exporters/clients on behalf of airlines for transportation. The appellants contended that they issued their transport documents and were responsible for safe and timely cargo transportation, making the airlines their service recipients.

The Revenue Authority, on the other hand, maintained that the appellants should pay service tax on the commission/incentive received from airlines for cargo booking. They argued that treating airlines as service recipients for commission amount should apply to all activities related to cargo booking, rejecting the appellants' claim that airlines were not their customers for rebate/incentive received.

The Tribunal analyzed the issue in detail, comparing it to a similar case involving Skylift Cargo. The facts and issues in both cases were found to be identical. The Tribunal referenced the arguments made in the Skylift Cargo case, where the Tribunal set aside the demand for service tax liability based on the decisions in other cases like Greenwich Meridian Logistics (India) Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai. The Tribunal concluded that the demands could not be sustained and set them aside, allowing the appeals with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, holding that they were not liable to pay service tax on the rebate/incentive received from exporters/clients for booking cargo space, based on the principles established in previous judgments and the specific circumstances of the case.