Global Account Manager's Activities Classified as Business Support Service not Business Auxiliary Service due to Operational Support Role: CESTAT [Read Order]

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that the activities performed by Global Account Managers ( GAM ) for international logistics management were not classifiable under "Business Auxiliary Services" ( BAS ) s these activities fell more appropriately under "Business Support Services" ( BSS ).

Expeditors International India Private Limited, the appellant, faced service tax demands of Rs. 49,35,060 and Rs. 33,18,111, along with equal penalties under Section 78 of the Finance Act, 1994. The tax was imposed because GAM activities and leased line expenses were taxable under BAS for the period from 2003 to 2009.

The appellant argued that GAM employees primarily performed global logistics coordination and provided operational and administrative support which aligned more closely with BSS. The counsel argued that BAS as defined under Section 65 of the Finance Act, includes promotion, marketing, and auxiliary services, which did not focus on the nature of GAM activities.

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The department argued that GAM employees provided services for the appellant’s clients, which are taxable under BAS. The revenue counsel argued that leased line expenses, used for communication between the appellant and its group companies, facilitated the provision of services to clients. So it was taxable under BAS.

The two-member bench comprising Bin Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) examined the nature of the activities performed by the Global Account Managers (GAM).

The tribunal observed that these activities were primarily related to logistics and operational support. As per the Finance Act, these kinds of activities fall specifically under the category of "Business Support Services" (BSS) rather than "Business Auxiliary Services" (BAS).

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The tribunal explained the principle established in Section 65A (2) (a) of the Finance Act, which states that specific classifications should take precedence over general ones. In this case, the BSS is a more specific classification for GAM activities compared to BAS, it was the correct category to apply.

The tribunal ruled that BSS only became taxable from May 1, 2011, the period in question was between 2003 and 2009. Therefore, no service tax could be levied on GAM activities during this earlier timeframe. The appellant’s appeal was allowed.

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