2018 (6) TMI 524 - AT - Service Tax

Business Auxiliary Services - services to airlines - additional amount received as incentives based on the volume of transaction for the activity of forwarding cargo through the airlines - whether the respondent is liable to pay service tax for the activity of booking space and selling the same to the client for air cargo goods? - Held that - The Tribunal in the case of Commissioner of Service Tax Vs. Continental Carriers 2017 (11) TMI 1109 - CESTAT NEW DELHI has held that the commission received from the airlines prior to 10.9.2004 cannot be subjected to service tax under Business Auxiliary Service - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Liability to pay service tax on incentives received based on the volume of business for forwarding cargo through airlines under Business Auxiliary Services.

Analysis:
The case involved a respondent registered under CHA services and Business Auxiliary Services acting as an agent to airlines (IATA) and receiving commission for various services related to cargo forwarding. The issue revolved around the department's proposal to demand service tax on the additional amount received as incentives based on the volume of transactions. The original authority confirmed the demand, interest, and penalties, which were set aside by the Commissioner (Appeals), leading the department to appeal before the Tribunal.

The appellant argued that the revenue earned by the respondent from booking space in airlines for international cargo movement, including incentives and commissions, should be subject to service tax under Business Auxiliary Service. However, the respondent's counsel cited precedents where similar issues were decided in favor of the respondents by the Tribunal. The Tribunal's decisions in cases like Continental Carriers, Indo Lloyd Freight Systems, and St. John Freight Systems supported the view that certain activities related to buying and selling cargo space did not fall under the purview of Business Auxiliary Service.

After hearing both sides, the Tribunal referenced earlier cases where it was established that for a demand under Business Auxiliary Service to be sustained, there must be involvement of a third party in the transaction. In the absence of such involvement, the demand cannot be upheld. The Tribunal emphasized that activities like buying and selling space in airlines for one's trading activities, without acting on behalf of a client, do not constitute taxable services under Business Auxiliary Service. The Tribunal's findings in various cases reiterated that the mere sale and purchase of cargo space for profit does not attract service tax under the Finance Act, 1994.

Ultimately, the Tribunal found no merit in the department's appeal, as the issue had been consistently decided in favor of the assessee-respondents in previous Tribunal orders. Therefore, the appeal filed by the department was dismissed based on the established legal principles and precedents cited during the proceedings.