ORDER
P.G. Chacko, Member (J)
1. After examining the records and hearing both sides, we note that the Commissioner has demanded service tax of over Rs. 93 lakhs along with education cess of over Rs. 1.4 lakhs from the appellants for the period 1.7.2005 to 30.9.2006 and has also imposed on them penalties. Service Tax of Rs. 16,22,329/-, education cess of Rs. 32,541/- and interest of Rs. 15,915/- were paid during the course of investigations, a fact noted in the Commissioner’s order. The impugned demand is under the category of ‘Business Auxiliary Services’. More precisely, it is on an amount earned by the assessee during the above period towards what has been found by the Commissioner to be ‘commission’ for the sale of space for cargo in aircrafts belonging to various airlines in terms of agreements entered into with them. It is submitted by the learned consultant that the amounts paid by the appellants during the investigative stage are for the normal period of one year with reference to the date of the relevant show-cause notice. We note that these payments were not made under protest. In the circumstances, for the present purpose, the appellants cannot claim prima facie case against the impugned demand on merits, though, of course, they can plead limitation against the demand for the extended period. It is this aspect which has been highlighted before us by the learned Consultant today. It is submitted that nothing was suppressed by the appellants before the Department and therefore the demand of service tax for the period beyond the normal period of limitation should be held to be time-barred. Contesting the case of the appellants, the learned Jt. CDR points out that an order dated 13.12.2005 issued by the Director-General of Service Tax holding air cargo agents to be liable to pay service tax as commission agents under the category of ‘business auxiliary services’ was very much known to the appellants and that, in view of that order, the appellants, in the normal course, should not have evaded payment of service tax on the gross amount collected by them from their clients [cargo owners] over and above the price paid to the airlines for accommodating cargo in the latter’s aircrafts operating international flights. In his rejoinder, the learned Consultant submits that, it was pursuant to a direction issued by the Hon’ble Bombay High Court that the DGST issued the above order. It is further pointed out that the Hon’ble High Court had subsequently withdrawn its direction and therefore the DGST’s order cannot have the force of law and, for that matter, cannot have any bearing on the Department’s allegation of suppression levelled against the appellants. In this connection reference has been made to Stay Order No. 354/2008 dated 5.5.2008 passed by this Bench in Appeal No. S/26/2008 of M/s. Sky Lift Cargo (P) Ltd. In the said stay order, the facts stated today by the learned Consultant in relation to the DGST’s order were considered in the context of dealing with a time-bar plea raised by the above party. The learned Consultant has also relied on Bhuvaneswari Agencies (P) Ltd. v. Commissioner 2007 (8) STR 167 (Tri. – Bang.), wherein the activity of arranging shipment of export cargo and negotiating the same with the shipping lines on behalf of clients was held not to be falling within the definition of ‘business auxiliary services’.
2. After a perusal of one of the agreements available on record, we note that the appellants, as general sale agents of the airlines were required, to render certain services to the latter, including collection of orders from cargo owners for space in aircrafts for export of the goods out of India. Under this agreement, the appellants were entitled to commission @ 5% and overriding commission @ 2.5%. We are told that the appellants paid service tax on the commission but not on the overriding commission. As regards service tax on commission, we have not found any evidence on record except the evidence of payment of an amount of Rs. One lakh. As regards overriding commission, it is fairly conceded by the learned Consultant, after obtaining instructions from his clients, that service tax was not paid. It appears from the provision in the agreement for payment of commission and overriding commission by the airlines to the appellants that the appellants were treated by the airlines as commission agents. The question now is whether the amount collected by them from their clients [cargo owners] as consideration for arranging space in aircrafts belonging to the airlines is exigible to service tax to the extent such amount is over and above the amount paid by them to the airlines for such space. The appellants have not made out prima facie case against the demand of service tax on this differential amount. As a matter of fact, they paid the tax along with education cess and interest for the normal period. Coming to the plea of limitation, we are not impressed with the argument made by the learned Consultant on the basis of the DGST’s order. That order was issued in 2005 during the extended period of limitation and the same made it clear to the trade that air cargo agents could be classified as providers of business auxiliary services and were liable to pay service tax accordingly. It is not the case of the appellants that the DGST’s order was set aside by any competent court. Admittedly, it was issued by the DGST pursuant to an order of the Hon’ble High Court. Though that order was withdrawn by the High Court, the DGST’s order was not withdrawn. In the circumstances, we are of the view that the appellants cannot claim any support to their plea of time-bar from the factum of the Hon’ble High Court’s direction having been withdrawn.
3. In the totality of the facts and circumstances of this case, we are of the view that the appellants should predeposit a reasonable amount over and above what they paid to the Revenue during the investigative stage. They shall deposit an amount of Rs. 10,00,000/- (Rupees ten lakhs only) within a period of four weeks and report compliance on 25.8.2008. In the event of due compliance, there will be waiver of predeposit and stay of recovery in respect of the amount of interest, penalties and balance tax.
(Dictated and pronounced in open Court)