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2025 (1) TMI 147 - AT - Service TaxClassification of services - Business Auxiliary Service or not - procuring the services of providing cargo space by airlines for their clients use for the export of goods - HELD THAT - Reliance placed in the appellant s own case for an earlier period in COMMISSIONER OF SERVICE TAX, CHENNAI VERSUS M/S. AVR CARGO AGENCY PVT. LTD. 2018 (6) TMI 524 - CESTAT CHENNAI , wherein this Bench had considered the additional amount received as incentives based on the volume of transaction for the activity of forwarding cargo through the airlines and, after following other orders of coordinate Benches, this Bench had ruled in favour of the assessee and held that the additional amount would not be liable to service tax. Conclusion - The demand for service tax under BAS was not justified. There are no merit in the impugned order - appeal allowed. 1. ISSUES PRESENTED and CONSIDERED The core legal question addressed in this judgment is:
2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework involves the classification of services under the Finance Act, 1994, specifically under 'Business Auxiliary Service'. Precedents considered include previous Tribunal decisions such as those in the cases of Continental Carriers, DHL Logistics (P) Ltd., and Karam Freight Movers, which dealt with similar issues regarding service tax liability on incentives and commissions earned from booking and selling cargo space. Court's Interpretation and Reasoning The Tribunal interpreted the activities of the appellant as not falling under 'Business Auxiliary Service'. It reasoned that for an activity to be categorized under BAS, there must be a third-party client involved in the transaction. The Tribunal noted that the appellant was engaging in transactions directly with airlines, purchasing cargo space for resale, and not acting on behalf of a client. Thus, the income from these activities, including incentives and commissions, could not be classified as BAS. Key Evidence and Findings The Tribunal relied on the appellant's business model, which involved buying cargo space in bulk and selling it to exporters. The Tribunal found no evidence that the appellant was acting as an agent for a third party, which is a requisite for classification under BAS. The Tribunal also noted the absence of any contractual obligation to a client that would necessitate the application of BAS. Application of Law to Facts The Tribunal applied the legal principles from prior decisions, emphasizing the need for a third-party client relationship for BAS to apply. It found that the transactions were principal-to-principal, involving only the appellant and the airlines, thus negating the applicability of BAS. Treatment of Competing Arguments The Tribunal considered the arguments of the Revenue, which sought to classify the incentives and commissions as BAS. However, it found these arguments unpersuasive, given the precedents and the nature of the transactions. The Tribunal highlighted that mere purchase and sale of space do not constitute a taxable service under BAS. Conclusions The Tribunal concluded that the demand for service tax under BAS was not justified. It set aside the impugned order and allowed the appeal, granting consequential benefits to the appellant. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The Tribunal quoted from prior decisions, stating: "The freight rebate is a revenue stream generated out of trading of the space in the airline incentives. Unless the space is booked by the appellant specifically for a client, the components of the Business Auxiliary Service do not come into play." Core Principles Established
Final Determinations on Each Issue The Tribunal determined that the appeal should be allowed, and the demand for service tax under BAS was not sustainable. The impugned order was set aside, and the appellant was granted consequential benefits as per law.
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