Cargo space trading margin is not service consideration; mark-up on resale was held outside service tax.

Mark-up earned on the purchase and resale of cargo space or slots with shipping lines and airlines was treated as trading income, not consideration for a taxable service under the Finance Act, 1994. The transaction was on a principal-to-principal basis: space was procured first and then allotted to customers at a higher price, so the profit element was a trading surplus. Because no identifiable service to customers was established, the demand based on business auxiliary or business support service could not be sustained and the mark-up was held not liable to service tax.

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Issues: Whether the mark-up earned on sale and purchase of cargo space/slots with shipping lines and airlines was liable to service tax as a taxable service under the Finance Act, 1994.

Analysis: The mark-up was found to arise from trading in cargo space and not from rendering of any service to customers. The record indicated principal-to-principal transactions in which space was first procured and then allotted to customers at a higher price, with the profit element being a trading surplus. The impugned demand proceeded on the assumption that the difference between purchase and sale price represented consideration for support services, but the Tribunal found no basis for classifying such trading receipts as taxable service income. The cited precedents consistently held that mere purchase and sale of space, resulting in profit, does not amount to business auxiliary or business support service, and that tax can be levied only on an identified taxable service, not on a trading margin.

Conclusion: The mark-up was not taxable as service tax and the demand could not be sustained.

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