2018 (9) TMI 181 - AT - Service Tax

Business Auxiliary Services - non-payment of service tax - extended period of limitation - Held that - The transaction is not purchase or sale of the space in Air Cargo Plane but the appellant is booking the space on behalf of shipper for particular consignment, for this arrangement the appellant is charging to the shipper and after retention certain percentage of commission remaining amount is remitted to Airlines towards booking of space. Therefore, the appellant is providing the service to the Airlines which falls under Business Auxiliary Service. Therefore, it is clearly taxable. Extended period of limitation - Held that - Ld. Commissioner (Appeals) has endorsed that the matter involved is of interpretation of law and the same was not free from doubt, therefore, the appellant were having the bonafide doubts - demand of extended period could not have been confirmed. Appeal allowed in part.

Issues:
1. Applicability of service tax on Air Cargo Agent services.
2. Imposition of penalty under Section 76, 77, and 78.
3. Interpretation of law regarding the transaction between the appellant and the shipper.
4. Consideration of extended period for demand of service tax.
5. Validity of the demand for the normal period.

Analysis:

Issue 1: Applicability of service tax on Air Cargo Agent services
The appellant, engaged in providing Business Auxiliary Services, had service tax registration since August 2005. The dispute arose when it was revealed that the appellant was engaged in the activity of an Air Cargo Agent but had not paid service tax on such services. The Tribunal held that the appellant was booking space on behalf of the shipper, charging the shipper, and remitting a commission to the Airlines for booking space. This arrangement was deemed as providing a service to the Airlines falling under Business Auxiliary Service, making it taxable. The Tribunal relied on previous judgments to support the taxability of the service.

Issue 2: Imposition of penalty under Section 76, 77, and 78
The Ld. Commissioner (Appeals) set aside the penalty imposed under Section 76, 77, and 78, citing the appellant's bonafide doubts and reasonable cause for the failure to pay service tax. The Tribunal agreed with this finding, noting that the matter involved the interpretation of law and was not free from doubt. Consequently, the penalties were waived under Section 80 of the Act.

Issue 3: Interpretation of law regarding the transaction between the appellant and the shipper
The appellant argued that the transaction involved purchasing space from Airlines and selling it to the shipper, with no service being provided. However, the Tribunal determined that the appellant was indeed providing a service to the Airlines by booking space on behalf of the shipper, making it taxable.

Issue 4: Consideration of extended period for demand of service tax
The demand for an extended period was set aside as the Ld. Commissioner (Appeals) acknowledged the bonafide doubts of the appellant regarding the applicability of service tax. The Tribunal agreed that the demand for the extended period could not be confirmed due to the interpretation of law being unclear.

Issue 5: Validity of the demand for the normal period
The demand for the normal period was upheld by the Tribunal, modifying the impugned order to set aside the demand for the extended period while confirming the demand for the normal period.

In conclusion, the Tribunal partly allowed the appeal, setting aside the demand for the extended period but upholding the demand for the normal period, based on the interpretation of law, taxability of the service provided, and the bonafide doubts of the appellant regarding the payment of service tax.

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