Franking charges and postal rebate were held outside Business Auxiliary Service tax because they were not consideration for a client service.

Franking charges collected from clients were treated as reimbursement of a statutory postal levy under the Indian Post Office Act, 1898, not as consideration for a service rendered to the client. The Tribunal held that the postal customer was the appellant, not its client, so no real service provider-client relationship existed to attract Business Auxiliary Service tax. It further found that the rebate from the Postal Department was only an incentive for bulk mailing and workload reduction, not commission or remuneration for a taxable service. Accordingly, the service tax demand on both franking charges and rebate was not sustainable.

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Issues: Whether franking charges collected from clients and rebate received from the Postal Department were liable to service tax under Business Auxiliary Service.

Analysis: The Tribunal followed its earlier view that postage by franking is a statutory mode of paying postal charges under the Indian Post Office Act, 1898, and that the customer of the postal service is the appellant, not the appellant's client. The amounts collected towards franking were reimbursements for a statutory postal levy and not consideration for a service rendered to the client. The rebate allowed by the Postal Department was only an incentive for bulk mailing and reduced workload, and did not represent commission, remuneration, or consideration for any taxable service. In the absence of a real service provider-client relationship between the Postal Department and the appellant's clients, the transaction could not be brought within the charging framework for Business Auxiliary Service.

Conclusion: The franking charges and rebate were not exigible to service tax, and the demand could not be sustained.

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