By TIOL News Service

MUMBAI, JULY 18, 2017: THE Facts are -

The appellant handles inbound and outbound cargo as a courier and issues airway bills for cargo booked by their customers. In order to optimize operations, the appellant books space on outbound flights in advance and consolidates the cargo of their customers for dispatch in such pre-booked space. The airline offers them special rates owing to the economies of bulk sale and the difference between the standard charge for the space and the special rate offered to them is consolidated as 'airline incentive' in their books of accounts.

A Service Tax demand of Rs.65,81,854/- has been confirmed against the appellant on this amount credited to 'airline incentive-AE' in their books of accounts.

The AA held that this amount is consideration for having rendered 'Business auxiliary service', taxable under the FA, 1994 and specifically 'attributable' to commission received for 'promoting or marketing the service of a client'.

Before the CESTAT, the appellant submitted that, in identical circumstances, the Tribunal has in Greenwich Meridian Logistics (India) Pvt. Ltd. - 2016-TIOL-869-CESTAT-MUM held that this income cannot be associated with the activity of rendering 'business auxiliary service'.

The Bench observed that the circumstances of the dispute are identical to that which existed in the matter before the Tribunal in re Greenwich Meridian Logistics (India) Pvt. Ltd.

After extracting the decision of the CESTAT in the cited case, the Bench concluded –

"5. …, we find no cause to deviate from the reasoning adopted by the Tribunal supra that the consideration received from a recipient of service for the services rendered by the provider alone is taxable. Consequently, a demand for alleged short-paid tax must be based on a finding that a specific taxable service has been provided, or agreed to be provided and on the consideration that was paid or payable by the recipient of that service to the provider of the service. The impugned order has failed to do so and had confirmed the demand merely because it has been accounted as a receipt in the books of the appellant."

The appeals were allowed.

(See 2017-TIOL-2462-CESTAT-MUM)