2018 (10) TMI 1558 - AT - Service Tax

Liability of Service Tax - Department took the view that appellants should have been paying service tax also on the freight charges reimbursed by them from their customers charged over and above the freight amount payable to the airline companies - Held that - The very issue had been addressed in the decisions of this Tribunal in the case of Skylift Cargo (P) Ltd. Vs CST Chennai 2018 (2) TMI 320 - CESTAT CHENNAI relied upon by Ld. Advocate holding that mere sale and purchase of cargo space and earning profit in the process is not a taxable activity - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellants, an air cargo agent, should pay service tax on freight charges reimbursed from customers.
- Whether the valuation by the Department of the "Difference" in the amount collected from customers is correct.
- Whether the appellants should be taxed on the entire amount collected from customers.
- Whether the service tax paid by airlines can be claimed as CENVAT credit by the appellants.
- Whether the appellants are liable to discharge service tax on the total value realized from customers.

Issue 1:
The Department contended that the appellants should pay service tax on freight charges reimbursed from customers over and above the freight amount payable to airlines. The adjudicating authority confirmed a reduced demand for service tax along with interest and penalties. The appellants challenged this in appeal.

Issue 2:
The appellants argued that the Department's valuation of the "Difference" was incorrect as it taxed the entire amount collected from customers, contrary to the order. They claimed that taxing the margin on the gross amount collected was incorrect. They cited legal precedents to support their argument against double taxation.

Issue 3:
The appellants further argued that even if the intention was to tax the entire amount collected from customers, the demand would fail. They contended that as agents collecting freight on behalf of airlines, the collected amount should not be treated as a service provided to customers. They also highlighted the issue of double-taxation and the availability of CENVAT credit.

Issue 4:
The appellants emphasized that there was no difference between the amount collected from customers and paid to airlines. They argued that no service tax should be demanded on this difference, citing legal precedents supporting their stance.

Issue 5:
The Department argued that the appellants, as agents, were liable to discharge service tax on the total value realized from customers. They contended that the appellants' activity of booking and marketing cargo space fell under the category of service chargeable to service tax on the gross amount received.

In the judgment, the Tribunal referenced previous decisions where similar issues were addressed, ruling in favor of the appellants. They cited cases where it was held that the mere sale and purchase of cargo space and earning profit did not constitute a taxable activity. The Tribunal set aside the impugned order and allowed the appeals based on the established legal principles and precedents.