Exported services and trading margins were not taxable where no taxable service or supporting evidence was established.

Manpower recruitment and supply services rendered to overseas customers, with consideration received in convertible foreign exchange, were held not liable to service tax during the gap between withdrawal and reinstatement of the exemption notification, as export of services remained tax free and the demand lacked corroborative evidence. The margin from bulk purchase and resale of air tickets, and commission-linked insurance bookings, was also held outside business auxiliary service because the Revenue failed to establish a taxable service and a mere trading margin did not amount to commission income. The order dropping the service tax demand was sustained and the Revenue's challenge failed.

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Issues: (i) whether consideration received in convertible foreign exchange for manpower recruitment and supply services rendered to overseas customers was liable to service tax during the interregnum between rescission and reinstatement of the exemption notification; (ii) whether the margin earned on purchase and resale of air tickets and commission on insurance and related bookings was taxable as business auxiliary service.

Issue (i): whether consideration received in convertible foreign exchange for manpower recruitment and supply services rendered to overseas customers was liable to service tax during the interregnum between rescission and reinstatement of the exemption notification.

Analysis: The service was rendered to customers situated outside India and the consideration was received in convertible foreign exchange. The levy could not be sustained merely because the exemption notification had been withdrawn for a period, where the circular clarified that export of services remained tax free. The demand also rested substantially on statements of the proprietor without corroborative material, and the taxable activity was not independently identified with supporting evidence.

Conclusion: The demand on this count was not sustainable and was rightly set aside.

Issue (ii): whether the margin earned on purchase and resale of air tickets and commission on insurance and related bookings was taxable as business auxiliary service.

Analysis: The transaction was one of bulk purchase and onward sale of tickets to individual travellers, resulting in profit on sale rather than consideration for a taxable service. The Revenue failed to establish that the activity fell within the statutory definition of business auxiliary service, and the mere existence of a price difference did not convert the transaction into taxable commission income.

Conclusion: The amount could not be taxed as business auxiliary service and the Revenue's challenge failed.

Final Conclusion: The order dropping the service tax demand was sustained in full, and the Revenue's appeal was rejected.

Ratio Decidendi: Service tax is leviable on a taxable service actually rendered, not on a mere money transaction or trading margin, and export-oriented services received in convertible foreign exchange cannot be taxed in the absence of a valid basis and corroborative evidence.

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