2. Air Travel Agent, Rail Travel Agents, CHA, etc. liable under separate categories – Air Cargo Agents cannot be taxed under Business Auxiliary Service :
2.1 Merely because the assessee are agents of the airlines, it cannot be said they are liable to service tax. All agents are not liable to service tax, except those otherwise made liable to service tax under specific category of taxable service.
2.2 Travel Agents liable to service tax under specific category :
The air travel agents are liable to service tax under Section 65(105)(4) read with Section 65(105)(1) of the Act. The rail travel agents are liable to service tax under Section 65(87) read with section Section 65(105)(zz) of the Act. Other travel agents are liable to service tax under section 65(115a) read with Section 65(105)(zzx) of the Act.
2.3 Other Travel Agents made taxable w.e.f. 10-9-2004, while Business Auxiliary Services existed w.e.f. 1-7-2003 :
The charge of service tax on Other Travel Agents under Section 65(115a) read with Section 65(105)(zzx) of the Act was imposed vide Finance Act, 2004 w.e.f. 10-9-2004. The Business Auxiliary Services stood w.e.f. 1-7-2003. While introducing the “Other Travel Agents Services”, the Letter F. No. B2/8/2004-TRU, dated 10-9-2004 declared thus (para 15):BVC-C.No.V(H)/Adj-I/ST/39/2012/4296 dtd. 22-03-2012-Reply Page 7 of 33
“15. Extension of service tax on air travel agents and rail travel agents to other travel agents :
At present, service tax is leviable on air travel agents and rail travel agents. Travel agents of other modes of transport (road, water) are not covered under service tax.The scope of service tax has been extended to include all travel agents. The taxable service is the service provided by travel agent in relation to the booking of passage for travel by modes other than air and road. The value of taxable service would be the commission/fee charged by the travel agent from the customer.”
2.4 Thus, the legislature didn’t conceive of ‘Other Travel Agents’ being liable to tax under Business Auxiliary Service or any other service and, accordingly, made them liable to service tax under separate category of taxable service.
2.5 It is to be noted that only travel agents have been made liable to service tax as above, and the cargo agents of railway/airlines have not been made liable to service under any category of service tax. Thus, no service tax can be charged upon the air cargo agents under ‘Business Auxiliary’, when the Legislature didn’t think it covering even the other travel agents.
2.6 Moreover, Transport of goods by road and Transport of goods by air are liable to service tax as a separate service, but, transport of passengers/goods by rail is not liable to service tax (exemption in respect of non-containerised transport of goods by rail) and transport of passengers by air and transport of passengers by road are liable to service tax under separate service. Customs House Agents are liable to service tax under separate category.
2.7 ALL THIS SHOWS THAT WHENEVER LEGISLATURE WANTED TO TAX AIR/RAIL/ROAD TRANSPORT OF GOODS OR PASSENGERS AND/OR THE AGENTS INVOLVED IN THESE ACTIVITIES, A SEPARATE CATEGORY OF TAXABLE SERVICE WAS CREATED.
2.8 THUS, RESORT TO BUSINESS AUXILIARY SERVICES IN RESPECT OF AIR CARGO AGENTS IS WHOLLY MISCONCEIVED AND AGAINST THE LEGISLATIVE MANDATE.
Business Actvity if Air Cargo Agent
(i) Assessee buys space in airlines :
The assessee is given a quote for air cargo transportation charges, i.e. tonnage/space rates on a pallet basis by an Airline. Such quotes are usually offered by airlines for bulk cargo or large quantity basis. As per industry nomenclature, this quote is referred to as the “buy rate”.
(ii) Airlines issues Master Air Way Bill (Master AWB) at buy rate :
The airline issues a Master AWB to the assessee based, on this buy rate. A Master AWB is basically a contract of carriage between the airline and the assessee. The Master AWB covers consolidated shipment of goods and LISTS THE ASSESSEE AS THE SHIPPER.
The contractual arrangement is therefore only between the airline and the assessee.
(iii) Assessee sells space to the consignors/ultimate shippers :
The assessee quotes its customer (the ultimate shipper) consignors a higher or lower rate for transportation of goods on such bulk cargo space purchased from airlines based on the commercial factors. This rate quoted by the assessee to the consignor is called “sell rate” as per industry nomenclature.
(iv) Assessee issues House AWB under Master AWB :
The assessee issues a House AWB to the ultimate shipper. The rate charged in this contract of carriage is the “sell rate”.
(v) Margin of Trading/Rebate :
The difference between the buy-rate and sellrate is the assessee’s margin on trading in such cargo space. The aforesaid is not at all related to any service.
The same represents profits from the
selling of cargo space. Such rebate generated by trading in cargo space cannot by any stretch of imagination can be said to be a consideration for rendering services. A copy of invoices is enclosed in