Order Date – 13 March 2024

Parties: Wig Air Freight Pvt. Ltd. Vs The Commissioner of Central Goods and Service Tax, New Delhi

Facts –

• The Appellant, Wig Air Freight Pvt. Ltd., was served with a show cause notice as the department compared the ST-3 returns, 26AS statements and the balance sheets of the appellant and concluded that they had under reported their taxable values and paid less service tax on the various services under the category of “Clearing and Forwarding Agent” (CFA) and “Business, Auxiliary Service” (BAS).
• Demand towards differential amount of service tax along with interest and penalty was raised by invoking the extended period of limitation. The demand on “incentive‟ was confirmed for the normal period from October 2013 to March 2015 rest demands were dropped.

Issue –

• Whether demand can be raised on “incentive‟?

Order –

• The Tribunal observed that the amount received by way of incentive is not on account of rendering any services but on account of trading activity which is not taxable under the Act. Section 66 which is the charging section provides for levy of tax at the rate of 12% on the value of taxable services referred on therein. Therefore, what is relevant for levy of service tax is the rendering of services.
• Relying the decision of Larger Bench in Kafila Hospitality the Tribunal observed that incentives are not to be construed as “consideration‟ and applying the said logic, the inevitable conclusion is that no service tax can be levied on incentives received by the appellant, coupled with the fact that incentive in the present case is a form of profit earned by the appellant as a result of a trading activity.
• Hence it was held that no service tax can be levied on “incentive‟.