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Commissioner of Service Tax V/S Continental Carriers

    Service Tax Appeal No. 60603 of 2013 (Arising out of Order-in-Original No. 35/SA/CCE/ST/2013 Dated: 6.8.2013 Passed by the Commissioner of Central Excise, Delhi-III) and Final Order No. 57330/2017

    Decided On, 20 October 2017

    At, Customs Excise Service Tax Appellate Tribunal Principal Bench New Delhi

    By, THE HONORABLE JUSTICE: DR. SATISH CHANDRA
    By, PRESIDENT AND THE HONORABLE JUSTICE: B. RAVICHANDRAN
    By, MEMBER

    For Petitioner: Sanjay Jain, D.R And For Respondents: V.S. Manoj, Advocate.



Judgment Text


1. The present appeal is filed by the Revenue against the Order-in-Original No. 35/SA/CCE/ST/2013 dated 06.08.2013 passed by the Commissioner of Central Excise, Delhi-III. The brief facts of the case are that, the assessee-Respondents are engaged in various activities as Customs House Agent and Freight Forwarder. The dispute in the present appeal relates to their tax liability under the category of 'Business Auxiliary Service' for the period 01.07.2003 to 31.03.2007. As freight forwarder, the assessee-Respondents earned income of two types; one relating to profit on selling the space in the aircraft which they have purchased earlier and later made available to various cargo shippers, and another in the form of commission received from the airlines based on the business they provided to these airlines in transport of cargo. The Revenue sought to tax both the incomes under 'Business Auxiliary Services' by treating them as consideration for promoting the services of another person. The original authority held that the assessee-Respondents are liable to pay the Service Tax only with respect to Commission received from airlines w.e.f. 10.09.2004 when the consideration received as 'Commission' is specifically brought into the ambit of 'Business Auxiliary Service'. Other demands were dropped. Being aggrieved, the Revenue is in appeal.

2. The learned DR for the Revenue reiterated the grounds of appeal and submitted that the original authority erred in appreciating the scope of the tax entry under Section 65(19) of the Finance Act, 1994 while dealing with the 'Business Auxiliary Service'. The assessee-Respondents are rightly liable to pay Service Tax for the whole of the period of demand as the scope of definition w.e.f. 01.07.2003 clearly covers their activities.

3. The learned counsel for the asessee-Respondents while defending the impugned order submitted that, for the income received by selling the space pre-booked in the aircraft, the matter has already been settled by the Tribunal in the case of CST, New Delhi vs Karam Freight Movers,, and DHL Logistics (P) Ltd. vs CCE, Mumbai-II, (2017) 84 taxmann.com 177 (Mumbai-CESTAT) . He submitted that the Tribunal, in fact, dealt with both the disputes now under consideration and held that no tax liability will arise on the assessee-Respondents on these incomes.

4. We have heard both sides and perused the material available on record. We note that the tax liability on similar activities under the category of 'Business Auxiliary Service' has already come up for consideration before the Tribunal in the above mentioned cases and the Tribunal in the case of DHL Logistics (P) Ltd. (supra) has observed that:

"4.2. Demand has been made on service tax under the head of Business Auxiliary Service for the revenue earned as freight rebate. Ld. Counsel has argued that the income is generated as a result of appellants buying cargo space in bulk and selling the same to foreign shipper, he argued that various essential activity in which there is no third party involved except the appellant and the carriers. In these circumstances demand under Business Auxiliary Service cannot be sustain. It is argued that for sustaining demand under BAS, there has to be third party involved in the transaction namely a client. In the absence of any client, no demand under BAS can be raised. We find substantial force in the argument of Ld. Counsel, 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. In the instant case, there is no such allegation and the appellants are booking the space for their own trading activities. In these circumstances demand of service tax under BAS cannot be sustained and the same is set aside.

4.3. The next issue is relates to the income under the head of airline commission and airline incentive sought to be text under BAS. It is seen that the said income is generated during the course of booking of bulk cargo by the appellant with the airline. The appellant have received the incentive and commission from the airline. The appellants are engaged in buying and selling of space in the airline and depending on the volume of the space bought by the appellant from the airlines they received the commission/incentive. The appellants are not buying and selling space on the airline on behalf of their client but on their own behalf. To consider the activity of buying and selling the taxable activity under the head of BAS, the same should be done on behalf of the client. Thus, if the appellants were selling the space on carrier from the airline directly to the exporters without themselves purchasing the space then it could have been considered as an activity involving promotion of sales. In the instant case the appellant are directly buying themselves and thereafter selling the same to the exporters. In this activity they are receiving incentive and commission based on the total space purchase by them from the airline. This activities can be no stretch of imagination by considered as BAS as for any service to statute the BAS at least three parties should be involved in the transaction namely the service provider, service recipient and the client. In the instant case there are only two parties in the transaction, the seller of space and the buyer of space. Any commission/incentive received, as a result of this transaction of sale cannot be considered as supply of BAS. In view of above, the demand under the head of BAS for the Revenue generated as airline/airline incentive is set aside."

5. Similar ratio has also been followed in the case of Karam Freight Movers (supra). The observations of the Tribunal are as below:

"11. On the second issue regarding the service tax liability of the respondent under BAS, we find that the impugned order examined the issue in detail. It was recorded that the income earned by the respondent, to be considered as taxable under any service category, should be shown to be in lieu of provision of a particular service. Mere sale and purchase of cargo space and earning profit in the process is not a taxable activity under Finance Act, 1994. We are in agreement with the findings recorded by the original authority. In this connection, we refer to the decision of the Tribunal in Greenwich Meridian Logistic (I) Pvt. Ltd. vs. CST, Mumbai : 2016 (43) STR 215 (Tri-Mumbai) . The Tribunal examined similar set of fact and held that the appellants often, even in the absence of shippers, contract for space or slo

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ts in vessels in anticipation of demand and as a distinct business activity. It is a transaction between principal to principal and the freight charges or consideration for space procured from shipping-lines. The surplus earned by the respondent arising out of purchase and sale of space and not by acting for client who has space or not on a vessel. It cannot be considered that the respondents are engaged in promoting or marketing the services of any "client"." 6. As the issue has already been decided in favour of the assessee-Respondents in the above mentioned orders of the Tribunal, we find no merit in the present appeal filed by the Revenue and the same is dismissed. In the result, the appeal filed by the Revenue is dismissed.
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