2016 (10) TMI 680 - AT - Service Tax

Levy of service tax - taxability of secondary services - commission received for booking of cargo space in various airlines as well as shipping lines - Business Auxiliary Services - Section 65 (19) of the Finance Act, 1994 - whether appellant is justified in holding that no service tax will be liable on the brokerage/commission received by them in the light of the CBEC Circular No. 56/5/2003-ST dated 25th April, 2003? - Held that - if the secondary services gets consumed with the services that are being exported, no service tax will be liable on such secondary services. It is not being disputed that the activity undertaken by the appellant is a secondary service rendered to the primary service provider namely the airlines towards export of cargo services. To this extent, the CBEC Circular covers the issue in favor of the appellant. The decision in the case of Lee & Muir Head Pvt. Ltd. vs. CST, Bangalore 2008 (10) TMI 131 - CESTAT, BANGALORE relied upon where it was held that the appellants are secondary service providers for the shipping lines, brokerage commission of 2% paid for booking of export cargo cannot be taxed under the category of Business Auxiliary Services . Demand not sustainable - interest and penalty also fails - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether commission received by the appellant for booking export cargo space is liable to service tax under Business Auxiliary Services.
- Interpretation of CBEC Circular No. 56/5/2003-ST dated 25th April, 2003.
- Applicability of previous judicial decisions in similar cases.

Analysis:
1. The appellant, holding service tax registration for providing services like CHA, Clearing & Forwarding, Cargo Handling, received commission and incentives from airlines for booking cargo space for export of goods. Revenue claimed the commission received is taxable under Business Auxiliary Services per Section 65 (19) of the Finance Act, 1994, leading to a demand of ?9,46,435/-.

2. The appellant contested the demand citing the CBEC Circular No. 56/5/2003-ST, which states that if secondary services merge with exported services, no service tax is applicable. The Tribunal found the appellant's activity as a secondary service to airlines for export, aligning with the circular's exemption criteria.

3. Referring to previous decisions like Ruth Shipping Agencies Pvt. Ltd. and Lee & Muir Head Pvt. Ltd., the Tribunal noted that the appellant acted as secondary service providers for shipping lines, making them exempt from service tax under Business Auxiliary Services. The Tribunal emphasized that the demand was unsustainable based on these precedents.

4. Ultimately, the Tribunal allowed the appeal, setting aside the impugned order due to the clear alignment of the appellant's case with the CBEC Circular and previous judicial decisions. The Tribunal found the issue no longer res-integra, leading to the dismissal of the demand and penalties, in line with the exemption criteria established by the circular and previous case law.