ST under BAS on buying & selling cargo space by MTO's

[RAJESH SANGHVI]

The assessee is a Multimodal Transport operator (MTO) who are treated as carriers under the MTO Act. The assessee does not own and shop or aircraft. The assessee buys cargo space from shipping/Airlines and sells this space to customers ( who want to ship good outside India or Into India ). This is known as buying/selling of cargo space and here leis profit or loss to the assssee. The assessee gets a Bill of Lading(BL)/Air way bill (AWB) from the Ship/Airline and in turn issues his own 'In-house B/L or AWB '  to the customer of the assessee. The assessee acts on a principal-to-principal basis with the ships/airlines. There is no agency agreement. No commission in this work because it is simple trading , be it profit or at loss some times.

The quesiton is the ST dept wants to tax the differential between buying and selling of such cargo space as 'BUSINESS AUXILLARY SERVICE { Sec 65(19) }under the logic that it involves this ' involves procurement of goods and services which are inputs for the clients. The ST Dept  treats this as kind of agency or now ( after 1-7-12 ) intermediary services.

Can the Dept tax this as BAS during the period 2004 to 31-3-12 and any specific judgements on this issue.

One more question. In the Pre deposit order the CESTAT has virtually examined the taxability of this cargo (buy/sale) difference and given its observations that THIS IS TAXABLE UNDER BAS.

AI Summary

Transport Operator's Profit from Cargo Space Sales Taxable as BAS Under Section 65(19), CESTAT Observes A Multimodal Transport Operator (MTO) is involved in buying and selling cargo space from shipping lines or airlines, issuing their own Bill of Lading or Air Waybill to customers. The Service Tax Department seeks to tax the profit margin from these transactions as Business Auxiliary Service (BAS) under Section 65(19), considering it intermediary service. The department may impose taxes and penalties for transactions since 2004 unless proceedings were not initiated. The CESTAT has observed this activity as taxable under BAS, and the operator may need to pay taxes with interest.