Air Cargo agents are covered under Business Auxiliary service - DGST

By Vijay Kumar

For once, the DGST, famous for his clarifications, was not giving one; he was passing a speaking order on the directions of the Bombay High Court. The question for determination by the DGST was

“whether services such as billing, collection or recovery of payments, issuing airway bills, marketing or canvassing of cargo, managing distributions and logistic etc rendered by Air Cargo Agency Agreement are liable to service tax and if so, whether these are covered within the definition of the "Business Auxiliary Services"

The association submitted before the DG that the department had asked the agents in different parts of the country to register under various categories as

1. Cargo handling services
2. Clearing and Forwarding agents services
3. Air Craft Operators services
4. Business Auxiliary Services
5. Transport of goods by air services
6. Transport of goods by Road

The counsels for the Association argued that

++ Since there is no uniform classification for this central statute, no tax can be levied.

++ It cannot be correct that in different parts of the country, different agents performing the same services are required to pay service tax under different headings

++ This would lead to chaos

++ Until such time the uniform of classification is arrived, they cannot be called upon to pay service tax under any heading.

++ Airlines are exempted from payment of service tax under any heading when they transport goods in relation to export cargo

++ that any person who provides secondary services in respect of the same activity is also automatically exempted from service tax

++ agents do not perform service activity which can fall under the "Business Auxiliary Services

++ they do not promote any airline or Airlines to the customer

++ they do not market anything on behalf of any airline and they do not sell any thing on behalf of any airline

++ The only service that they perform is to book cargo space on any airline at random depending on the best rates offered, best time table offered and the quickest route offered as per customers' directions.

++ The airline is not the client of the Air Cargo Agent at any time either under Business Auxiliary Services or even under IATA which regulates the business of the airlines as well as the agents and to which IATA is a signatory and active member

++ The commission received for blocking cargo space on any airline is uniform under IATA notwithstanding any other consideration. Therefore, there is no promotion of any individual airline

++ Air Agents and rail Booking Agents also book space for passengers for which they receive identical uniform commission from the Airlines under IATA.

++ It is inconsiderable that for passenger's space, the service is provided to the passenger but for Cargo space, the service is provided to the airline.

++ Merely because there is no specific heading for Air Cargo Agents, they cannot be confined to the orphanage of "Business Auxiliary Services”

++ Therefore, If "Business Auxiliary Service" is still the service in the mind of the department, the department will have to show with evidence why Air Cargo Agents fall under the heading "Business Auxiliary Services".

++ it may kindly be clarified as to from whom the Air Cargo Agents may claim reimbursement of the service tax paid by them this is because airlines are refusing to reimburse service tax taking the ground that for passengers services, the amount is recovered from the passengers. Therefore, for cargo services, there can be no discrimination and they are not the clients of the airlines.

++ The activities of the agents was summarized as

(a) Accept goods from the shippers on behalf of the member Airlines for international transportation.

(b) Prepare the Airway bill on behalf of the member Airlines to the shipper. They Airway bills are issued on behalf of the Airlines, the charges of which are fixed by the member airlines and are not in control of the members of the Associations.

(c) Book the space for transport of cargo after due permission from the member airlines.

(d) Collect and Accept payments of prepaid transportation and other charges on behalf of the airlines and remits the same on due dates to the airlines irrespective of the fact whether the amount is collected from the shipper or not.

(e) The Agents i.e. the members of the Association can represent itself on letterhead, telephone listings etc. as agents representing the carrier and,

(f) For the aforesaid functions the Agents get the commission, which is fixed by the IATA as per the agreement.

The DG in his findings first found out the various services under which the agents were sought to be taxed, in the law and drew up the following chart.