Airlift Associates Vs Commissioner of GST & Central Excise (CESTAT Chennai)
In Airlift Associates Vs Commissioner of GST & Central Excise, multiple appeals were filed against orders confirming service tax demands on airway bill fees, freight margins, commissions, incentives, and reimbursable expenses for the period July 2003 to March 2012. The appellant, engaged in cargo booking and logistics services as a multimodal transporter, purchased cargo space from airlines or shipping lines and offered it to exporters, sometimes earning a margin based on the difference between purchase and sale price.
The appellant accepted the liability on airway bill charges but contested demands relating to freight margins and reimbursable expenses. It argued that freight margins arise from principal-to-principal transactions involving purchase and sale of cargo space, constituting profit from trading activity rather than consideration for a taxable service. It also contended that reimbursable expenses recovered on actual basis cannot be included in the taxable value, relying on judicial precedent holding such inclusion invalid prior to statutory amendment.
The Tribunal observed that consistent judicial decisions have held that profit margins from cargo space transactions are not liable to service tax, as these are independent principal-to-principal transactions and not services rendered as an agent. It also held that reimbursable expenses cannot form part of taxable value prior to the amendment of Section 67 effective from 14.05.2015, and Rule 5 seeking such inclusion was ultra vires.
