The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has quashed a large service tax demand raised by the CGST department, holding that income from freight space trading, export of services, and trade discounts cannot be subjected to service tax.
A Bench comprising Ms. Binu Tamta (Judicial Member) and Mr. P.V. Subba Rao (Technical Member) ruled that freight and incidental charges amounted to a trading activity and not the provision of services. The Tribunal further held that discounts received from airlines and shipping lines were in the nature of price concessions for bulk purchases and could not be treated as consideration for services.
The bench clarified that export-linked services were clearly outside the tax net, both under the Export of Service Rules, 2005, and the Place of Provision of Services Rules, 2012. Additionally, reimbursements received in the capacity of a pure agent and prior period items were found to be non-taxable in the absence of any evidence linking them to the provision of taxable services.
The case involved multiple show cause notices issued between 2007-08 and 2015-16, where the tax authorities had sought to levy service tax, interest, and penalties on various categories of income including freight charges, incidental charges, discounts from airlines and shipping lines, reimbursements, and export-linked receipts
The income tax department alleged that the assessee had not fully discharged service tax liability on amounts received under different heads, and accordingly confirmed demands under Section 73 of the Finance Act, 1994, along with penalties under Sections 76, 77, and 78.
The assessee contended that buying cargo space from airlines/shipping lines and selling it to exporters was a principal-to-principal trading activity, not a taxable service. Discounts for bulk bookings were commercial concessions, not consideration for services. Services rendered to overseas clients with payments received in foreign exchange qualified as export of services, exempt from service tax. Reimbursements as pure agent and “other income” did not fall within the ambit of taxable services.
The Tribunal stressed that none of the disputed income categories were eligible for service tax, by invalidating the Commissioner’s order.
Case Details
Case Title: Shine Travels & Cargo Pvt Ltd Versus Principal Commissioner
Case No.: Service Tax Appeal No. 51079 Of 2022
Date: 26/09/2025
Counsel For Appellant: A.K. Batra and Ms. Sakshi Khanna, Chartered Accountants
Counsel For Respondent: S.K. Meena, Authorised Representative
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