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.

[YAGAY andSUN]

Department may charge tax on this transaction for last five years unless until proceeding were not initiated from the year 2004.  According to Contract Act, contract can express or implied.  Procurement of goods and services which are inputs from the client was come in the picture from 10-09-2004.

You would have to pay the tax with statutory interest and department may impose penalty on you.

 

AI Summary

Business auxiliary service: margin on bought-and-sold cargo space can be taxed, exposing MTOs to assessment and penalties. MTOs that buy cargo space from carriers and resell it to customers, issuing their own house bills and acting on a principal-to-principal basis without agency, face revenue contention that the margin on such transactions constitutes Business Auxiliary Service (and later Intermediary Services), rendering the differential taxable and exposing firms to retrospective assessment with interest and possible penalties.