2026-VIL-36-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Classification of Service - Transportation of Goods by Air or BAS, Place of provision of services, Intermediary services – Appellant was appointed as the sole selling agent for export of cargo. The appellant invoiced the exporters a consolidated amount covering the cost of transportation from the exporter's location to the final destination, including the international leg through Aeroflot and incidental expenses. The appellant paid Aeroflot and other service providers for their respective services - Whether the appellant's services were "Transportation of Goods by Air" under Section 65(105)(zzn) of the Finance Act, 1994, which was exempt from service tax, or "Business Auxiliary Services" under Section 65(105)(zzb), which were taxable – HELD – The charge of the service tax is on the service rendered and not on the agreements signed. In a case such as this where the services were rendered differently from what was contemplated in the agreement, the actual services rendered must be considered regardless of what was agreed to - Instead of selling space on behalf of Aeroflot, the appellant offered to the exporters a complete end-to-end package transporting from the exporter’s place up to the final destination and invoiced the exporters a consolidated amount for this service - The appellant did not act as an agent of either Aeroflot or the exporters, but rather entered into principal-to-principal agreements with both. The appellant offered a complete package deal of transporting the goods from the exporter's location to the final destination, utilizing the services of Aeroflot and other service providers. Therefore, the appellant's services were covered under the definition of "aircraft operator" in Section 65(3b) and "Transportation of Goods by Air" under Section 65(105)(zzn), which are exempt from service tax – The impugned order confirming demand of service tax with interest and penalties is set aside and the appeal is allowed - Whether the appellant's services after 1.7.2012 were taxable under the Place of Provision of Services Rules, 2012 (POPS Rules) – HELD - The appellant did not provide any intermediary services, but rather rendered the service of transporting the goods by air to the destination. As per Rule 10 of the POPS Rules, the place of provision of such services is the destination, which was outside India. Therefore, no service tax was payable on the appellant's services after 1.7.2012 as well - Interpretation of term ‘aircraft operator’ – HELD - The term ‘aircraft operator’ must be interpreted as per the statutory definition in section 65 (105) (3b) insofar as it pertains to this Act according to which ‘aircraft operator’ means any person which provides the service of transport of goods or passengers by aircraft. Nothing in this definition requires one to either own or lease or run an aircraft. So long as one provides the service of transport of goods or passengers by aircraft, one is covered by the definition of ‘aircraft operator’. The appellant provided the service of transporting goods of the exporters by air using the services of Aeroflot, domestic airlines, etc. and hence is squarely covered by the term aircraft operator and is covered by the charging section 65 (105) (zzn) of the Act which service, was exempt by notification no. 29/2005-ST dated 15.7.2005.
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