2024 (7) TMI 929 - AT - Service Tax

Levy of service tax - Business Auxiliary Service (BAS) - margin between the purchase price and selling price of cargo space - suppression of facts - extended period of limitation - HELD THAT - Admittedly, there is no dispute that the Appellant as an IATA Member, books the cargo space in various airlines for which they pay the amount to the airlines. Subsequently, they sell such space to their clients. The clients are sold the cargo space which is already booked by the Appellant. It is not the case of the Department that the Appellants are getting any commission from the airlines or from their clients. This is a purely a trading activity of purchase and selling of cargo space and a margin between the same is only the profit. Such an activity cannot be treated as an activity amounting to service to their clients. There is no liability to pay any Service Tax in terms of Business Auxiliary Service (BAS) as has been held of the Adjudicating Authority. The re-imbursement received by the Appellant in the course of providing their service, the issue is no more res integra. The Hon ble Delhi High Court in the case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. ANR. 2012 (12) TMI 150 - DELHI HIGH COURT where it was held that ' What is brought to charge under the relevant Sections is only the consideration for the taxable service. By including the expenditure and costs, Rule 5(1) goes far beyond the charging provisions and cannot be upheld. It is no answer to say that under sub-section (4) of Section 94 of the Act, every rule framed by the Central Government shall be laid before each House of Parliament and that the House has the power to modify the rule.' All the data which has been used for quantification of the demand emanates from the Profit and Loss account of the Appellant. All these facts show that there has been no attempt on the part of the appellant to suppress any fact. The Department has not come out with any concrete evidence to the effect that the Appellant has deliberately suppressed any facts to evade Service Tax payment - the confirmed demand pertaining to the extended period is not legally sustainable - the confirmed demand for the extended period set aside even on account of limitation also. The Appellant would be eligible for consequential relief - Appeal allowed.

Summary

Issues Involved:
1. Liability to pay Service Tax on the margin between the purchase price and selling price of cargo space under Business Auxiliary Service (BAS).
2. Liability to pay Service Tax on reimbursements received from clients.
3. Validity of the extended period for demand due to alleged suppression of facts.

Issue-wise Detailed Analysis:

1. Liability to Pay Service Tax on the Margin Between the Purchase Price and Selling Price of Cargo Space Under Business Auxiliary Service (BAS):

The Appellant, an IATA Agent, purchased cargo space from airlines at discounted rates and sold it to independent customers. The Revenue issued a Show Cause Notice (SCN) claiming that the margin between the purchase price and selling price of such cargo space is liable for Service Tax under Business Auxiliary Service (BAS). The Appellant argued that this activity amounts to trading, and the margin is the profit earned, not a service. The Tribunal found that the Appellant's activity of booking and selling cargo space is purely a trading activity and not a service. The Tribunal referenced its own previous decision and other judicial precedents, concluding that no Service Tax liability arises under BAS for such trading activities. Thus, the confirmed demand of Rs. 45,83,395/- was set aside.

2. Liability to Pay Service Tax on Reimbursements Received from Clients:

The Appellant received reimbursements from clients for expenses incurred on their behalf while providing services. The Revenue contended that these reimbursements should be included in the taxable value for Service Tax. The Appellant relied on the judgment in Intercontinental Consultants & Technocrats Pvt. Ltd. v. UOI, where it was held that reimbursements cannot be treated as consideration for taxable services. The Tribunal agreed, citing the Supreme Court's affirmation that only the value of the service rendered can be taxed, not the reimbursements. Consequently, the demands of Rs. 1,16,43,670/-, Rs. 19,59,785/-, and Rs. 56,11,525/- were set aside.

3. Validity of the Extended Period for Demand Due to Alleged Suppression of Facts:

The SCN issued on 21/12/2012 covered the period from 2007-08 to 2010-11, alleging suppression of facts. The Appellant argued that they had been regularly filing ST-3 Returns and accounting for all transactions in their Profit and Loss account and Balance Sheet. The Tribunal found that there was no concrete evidence of deliberate suppression by the Appellant. The case law in favor of the Appellant supported their bona fide belief that no Service Tax was payable on reimbursements and trading in cargo space. Therefore, the Tribunal held that the extended period for demand was not legally sustainable and set aside the confirmed demand for this period on account of limitation.

Conclusion:

The Tribunal allowed the appeals, setting aside the confirmed demands on both merits and limitation grounds. The Appellant was found not liable to pay Service Tax on the margin from cargo space trading and reimbursements received from clients. The extended period for demand due to alleged suppression was also deemed unsustainable. The Appellant was granted consequential relief as per law.