Cargo space mark-up treated as trading activity, not Business Auxiliary Service, where the operator acted on its own account.

Mark-up earned on purchase and resale of cargo space was treated as principal-to-principal trading rather than Business Auxiliary Service, because the appellant booked space on its own account, bore commercial risk, and acted without any principal-agent relationship with carriers or customers. Its status as a Multimodal Transport Operator and responsibility for safe carriage supported the view that it was not rendering service on behalf of another person. Consistent Tribunal precedent and the departmental circular on freight forwarders acting on their own account reinforced that the activity fell outside the service tax net, so the demand could not survive.

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Issues: Whether the difference or mark-up earned by the appellant on purchase and sale of cargo space on shipping lines and airlines is taxable under Business Auxiliary Service, or whether the activity is a principal-to-principal trading transaction outside the service tax net.

Analysis: The appellant was engaged in booking cargo space on its own account and reselling it to customers, with the commercial risk of gain or loss depending on market demand. The arrangement did not show a principal-agent relationship with either the carriers or the customers. The appellant's status as a Multimodal Transport Operator and the responsibility assumed for safe carriage further supported the position that it was acting on its own account. The consistent view in earlier Tribunal decisions, along with the departmental circular recognising that a freight forwarder acting on its own account is not an intermediary, supported the conclusion that the mark-up arose from trading activity and not from rendering a taxable service on behalf of another person.

Conclusion: The mark-up on cargo space was not taxable as Business Auxiliary Service and the demand could not survive.

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