CESTAT Sets Aside Service Tax Demand on Air Freight Mark-Up, Cites Lack of Third-Party Involvement Under BAS [Read Order]
Relying on its prior ruling and precedents in similar cases, held that since the appellant independently bought and sold cargo space without acting on behalf of a client, the transaction did not attract service tax liability.
![CESTAT Sets Aside Service Tax Demand on Air Freight Mark-Up, Cites Lack of Third-Party Involvement Under BAS [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/CESTAT-Aside-Service-Tax-Demand-Air-Freight-Mark-Up-of-Third-Party-Involvement-Under-BAS-TAXSCAN.jpg "CESTAT Sets Aside Service Tax Demand on Air Freight Mark-Up, Cites Lack of Third-Party Involvement Under BAS [Read Order]")
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside the service tax demand on the air freight mark-up, ruling that there was no third-party involvement to classify it under Business Auxiliary Service (BAS). AVR Cargo Agency Pvt.Ltd.,appellant-assessee, provided Custom House Agent (CHA) and BAS. It collected air freight from clients and paid...
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside the service tax demand on the air freight mark-up, ruling that there was no third-party involvement to classify it under Business Auxiliary Service (BAS).
AVR Cargo Agency Pvt.Ltd.,appellant-assessee, provided Custom House Agent (CHA) and BAS. It collected air freight from clients and paid airlines for cargo forwarding. The authorities classified its role in procuring cargo space for clients as 'Business Auxiliary Service' from September 10, 2004, and considered the markup on air freight as part of the taxable service value.
Read More:Service Tax Not Applicable on Freight Margin Recovered from Customer on Outbound Shipment: CESTAT
A show cause notice demanded ₹1,52,027 in service tax for April 2009 to March 2010, along with interest and a penalty under Section 76. The Commissioner (Appeals) upheld the demand, leading to the present appeal.
The two member bench comprising P.Dinesha(Judicial Member) and Vasa Seshagiri Rao(Technical Member) reviewed the documents, orders, and arguments presented. The main issue was whether the service tax demand under Commission Agent service on other receipts was justified.
Referring to its earlier order [Final Order No. 40876/2018 dated 12.03.2018], the bench noted that a similar issue had already been decided in the assessee’s favor. It ruled that incentives received based on transaction volume for forwarding cargo were not subject to service tax.
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Citing decisions in DHL Logistics (P) Ltd. and Continental Carriers, the tribunal found that freight rebates and incentives from bulk cargo space purchases did not fall under ‘BAS. Since the assessee bought and sold cargo space directly, without acting on behalf of a client, the transaction was not a taxable service.
As the Revenue did not provide valid reasons to deviate from these rulings, the CESTAT set aside the demand for service tax.
To Read the full text of the Order CLICK HERE
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