Cargo space pre-booking treated as principal-to-principal trade, not Business Auxiliary Service, so service tax demand fails.

Amounts earned from pre-booking cargo space with airlines or shipping lines were treated as outside Business Auxiliary Service because the operator procured space on its own account, assumed the risk of non-use, and then allotted that space to customers. The arrangement was characterised as principal-to-principal rather than an agency service. The consideration received was viewed as freight-related payment arising from purchase and sale of space, not as consideration for promoting or marketing the carrier's services. On that basis, the service tax demand was found unsustainable and the activity was held not to fall within the Business Auxiliary Service definition.

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Issues: Whether the amounts earned from pre-booking space in airlines or shipping lines for cargo transportation are taxable as Business Auxiliary Service.

Analysis: The Tribunal followed its earlier decision on the same issue and adopted the reasoning that the appellant procures space from the carrier on its own account, assumes the risk of non-use, and thereafter allocates the procured space to customers. The transaction was treated as a principal-to-principal arrangement rather than an agency service. The charges recovered from customers were viewed as freight-related consideration arising from purchase and sale of space, not as consideration for promoting or marketing the services of the shipping line or airline. On that basis, the definition of Business Auxiliary Service was held not to cover the activity.

Conclusion: The demand of service tax was held unsustainable and the appellant succeeded on the merits of classification.

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