2009 (5) TMI 175 - AT - Service Tax

Commission and incentive received from various airlines for booking cargo on their flights - Commissioner found that by canvassing cargo for shipment by various airlines the appellant had rendered services falling under BAS to the various airlines and short-paid service tax on commission received from the airlines as incentive. - We find that lion s share of the impugned demand is attributable to the notional income earnable by the appellant if it had sold cargo space of airlines at the published rate, without discount. We find that the service tax is leviable, prima facie, only on the commission received by the appellants, a commission agent. Prima facie, discount allowed by the airlines cannot be treated as commission. We also find considerable force in the submission that tax is not leviable on the impugned services as the services pertained only to export of cargo. stay granted

Summary

Issues:
Waiver of pre-deposit of service tax, interest, and penalty under the category 'Business Auxiliary Service' (BAS) for the period 1-7-2003 to 31-3-2006.

Analysis:
1. Waiver of Pre-deposit:
M/s. Skylift Cargo Pvt. Ltd. sought waiver of pre-deposit of an amount of Rs. 18,16,017/- for service tax, interest, and penalty imposed under Section 78 of the Finance Act, 1994. The Commissioner found that Skylift Cargo Pvt. Ltd. had not paid service tax on the commission and incentive received from airlines for booking cargo on their flights. The appellants contended that a significant portion of the demand was due to a notional discount on published fare for cargo transport, which should not be taxable. They argued that the tax was not on services rendered to airlines but to cargo shippers, and therefore, the demand was not in accordance with law. The appellants relied on a decision by the ITAT to support their claim that the discount allowed by airlines should not be considered as part of the commission subject to service tax.

2. Taxability of Services:
The Tribunal considered the submissions of both parties and found merit in the appellant's arguments. It was observed that the bulk of the demand was related to notional income based on selling cargo space at the published rate without discount. The Tribunal noted that service tax should prima facie be levied only on the commission received by the appellants as commission agents. The Tribunal agreed with the appellant's contention that the discount allowed by airlines should not be treated as commission, citing a previous decision by the ITAT. Additionally, the Tribunal acknowledged the appellant's argument that tax was not leviable on the services as they pertained to the export of cargo. Considering the contentious issues involved, the Tribunal decided to waive the pre-deposit of the adjudged dues and stayed the recovery until the appeal's final disposal.

This judgment highlights the importance of distinguishing between taxable commission and non-taxable discounts in the context of service tax liabilities. It also underscores the significance of considering the nature of services provided and the applicability of tax laws in specific scenarios, such as services related to the export of goods. The decision to waive pre-deposit reflects the Tribunal's recognition of the complexity and significance of the legal issues raised in the appeal.