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Issues involved: Determination of liability to pay Service Tax on net commission received from banks u/s 'Business Auxiliary Service'.
Summary: The appeal was filed by the Revenue against the order passed by the Commissioner of Service Tax, holding the respondents liable to pay Service Tax on the net commission received from banks. The respondents, acting as commission Agent/Direct Selling Agent for marketing auto loan products, were arranging loan facilities for buyers of motor vehicles. The main issue in the appeal was whether the respondents should pay Service Tax on the net amount received or the gross amount paid by the bank. During investigations, it was revealed that the DSA discounts the commission by way of subvention to the banks as per commercial arrangements. The banks accounted for the gross commission to the credit of the DSA before deducting the subvention. The Revenue contended that Service Tax should be paid on the gross commission, while the respondents argued that they should pay tax only on the actual amount received as commission from the banks. The Tribunal referred to previous decisions where it was established that Service Tax should be paid on the gross amount charged by the service provider. The Tribunal found that the impugned order holding the respondents liable to pay tax on the net commission was not sustainable and set it aside. It was decided that the respondents were liable to pay Service Tax on the gross amount of commission. Regarding penalties under Sections 76 and 78 of the Finance Act, it was noted that as the respondents were under a bona fide belief that tax should be paid on the net amount of commission, penalties were not imposed. In conclusion, the appeal was disposed of in favor of the Revenue, with the decision pronounced on 17-10-2013.
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