The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a service tax demand on the difference between the price at which it acquired airline cargo space and the price at which it sold that space to customers.
The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) held that its earlier rulings in the company’s own cases governed the same issue.
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The appellant/assessee acted as a general sales agent for Malaysian Airlines. It received commission for certain sales made on the airline’s behalf and paid service tax on that commission. The dispute concerned a different category of transactions: cargo space sold under specifically agreed rates, where the company earned the difference between its purchase and selling prices.
The Commissioner treated that difference as consideration for Business Auxiliary Service (BAS) and confirmed a service tax demand. The assessee challenged the order in two appeals before CESTAT.
The Tribunal examined its earlier decisions involving the same company. Those decisions distinguished between commission earned as an airline agent and income arising from the resale of cargo space.
Under the agreement discussed in the earlier rulings, assessee could claim sales commission at 5% of the applicable published rate for specified services. But where the airline and the company had agreed specific rates for transporting a consignment on a particular route, the company was not entitled to commission.
For those specifically priced transactions, the company acquired cargo slots and sold them to customers or exporters. The earlier Bench found that the gap between the buying and selling prices was a trading margin. The company could make a profit or suffer a loss on a sale, which supported the conclusion that it was acting as an independent buyer in those transactions rather than earning commission for selling on the airline’s behalf.
The earlier rulings also noted that service tax had already been paid on the commission assessee received as a general sales agent. The demand before the Tribunal was confined to the price difference on cargo-space sales.
The Tribunal found no change in the relevant facts or law. Although the department filed a detailed synopsis and pressed for the demand to be upheld, the Bench said the earlier orders had reached finality and saw no reason to depart from them. Those rulings had held that the resale margin on cargo space did not fall within BAS.
CESTAT therefore set aside the Commissioner’s order and allowed both appeals, with consequential benefits, if any, as per law.
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