The court determined that the actual services provided by the appellant constituted Transportation of Goods by Air, exempting it from service tax.

P.V. SUBBA RAO

M/s. Delmos Aviation Pvt. Ltd., the appellant filed this appeal to assail the order dated 16.5.2019, impugned order passed by the Commissioner deciding the proposals made in the show cause notice dated 21.10.2015, SCN I covering the period 2010-2011 to 2014-2015 and in the show cause notice dated 12.4. 2018, SCN II covering the period 2015-2016 to 2017-18 and confirmed demands of service tax with interest and penalties. The details are as follows:

2. The undisputed facts of the case are that Aeroflot, a Russian airlines in the business of transporting passengers and cargo by air, appointed the appellant as it‘s sole selling agent in India, Nepal, Bangladesh and Sri Lanka for export of cargo and entered into a General Sales and Service Agent (GSSA) agreement. Some part of this agreement is placed at pages 87 to 92 of the appeal. In this agreement Aeroflot is referred to as the Principal and the appellant as GSSA. The purpose of this agreement and the functions of the appellant are indicated as follows:

―2. PURPOSE OF THE AGREEMENT

The purpose of the present agreement is the sale of air cargo transportation on the services of Aeroflot by GSSA in accordance with Aeroflot rules and regulations, the sale of air cargo transportation on behalf of Aeroflot on the services of other Air carriers, representation of Aeroflot before government, courts of Law, tribunals, to act on behalf of Aeroflot in accordance with written instructions of the Principal.

7. FUNCTIONS OF GSSA The GSSA shall perform the following functions on behalf of the Principal:

7.1 Selling air cargo transportation on the services of the Principal and on his behalf on the services of other Air Carriers in accordance with Principal’s rules and regulations and documentation and written instructions provided by the Principal.

7.2 Supervising other Agents (Forwarders), Associates and other customers in the territory and to settle accounts with those Agents (Forwarders), Associates and other customers in connection in the sales of air cargo transportation on the routes within the network of the Principal and in connection with sales of ar cargo transportation sold on behalf of the Principal on the services of other Air Carriers with issuance of traffic and accounting documents of the Principal (such as Airway bills)

…..”

3. Although the agreement required the appellant to be an agent and sell service of transportation of goods by Aeroflot, the actual business took place differently. Had the appellant acted as an agent of Aeroflot, it should have received a commission for it‘s services and Aeroflot should have issued invoices to exporters for the service of transporting goods. Aeroflot only paid an amount of US$ 1 per Airway bill to the appellant for it's services on which the appellant paid service tax which is not in dispute.

4. For export of cargo, the appellant invoiced the exporters and received consideration for the service. The appellant charged the exporters a single consolidated amount based on the nature of goods, destination, volume, size, the cost of transporting the goods from the exporter‘s location to Delhi or Goa from where Aeroflot operated it‘s aircrafts, incidental expenses such as loading and unloading of cargo, repair of tampered cargo, etc. Thus, what the appellant received from the exporter was a single amount covering all costs including and upto the place of destination.

5. Aeroflot invoiced the appellant for transportation of cargo and the appellant paid Aeroflot for transporting the goods from Delhi or Goa to the destination.

6. There was thus, a no lis between