2013 (12) TMI 1617 - AT - Service Tax

Summary

Issues Involved:
The issues involved in the judgment are the delay caused in filing an appeal against the pre-deposit order and the service tax demand on trade discounts given by the manufacturer to the wholesale distributor.

Issue 1: Delay in Filing Appeal Against Pre-Deposit Order
The appellant initially filed an appeal against an order dismissing their appeal for non-compliance. They were directed to file an appeal against the pre-deposit order as well, resulting in a delay of 54 days. The delay was solely due to the Bench's direction to file the additional appeal. The COD application was allowed considering the reasons provided were satisfactory.

Issue 2: Service Tax Demand on Trade Discounts
The appellant, a wholesale distributor, was appointed by the manufacturer to sell Jarda under a specific brand. The manufacturer provided trade discounts based on the weight of the product sold. The Revenue contended that these discounts were akin to a commission for subsequent sales, falling under Business Auxiliary Service liable to service tax. Show-cause notices were issued, leading to a service tax demand of Rs. 4,72,922/- along with interest and penalties. The lower appellate authority directed the appellant to make a pre-deposit of the entire service tax amount, which was not complied with, resulting in the dismissal of the appeal.

The wholesale distributorship agreement clarified that the goods were sold to the appellant by the manufacturer, who had already paid excise duty and VAT. Upon delivery at the factory gate, the appellant became the owner of the goods and then resold them to other dealers/retailers. This transaction was deemed a sale of goods, not a service. The appellant successfully argued that their activity did not attract service tax. Consequently, the order directing the pre-deposit of the entire service tax amount was deemed unsustainable in law, and thus set aside.

As the appeal was not decided on merits by the lower appellate authority, the matter was remanded back to them for a reconsideration of the appeal on its merits. The appellant was to be given a reasonable opportunity to present their case. The appeal was allowed by way of remand, and the stay petition was also disposed of accordingly.