2013 (7) TMI 1055 - AT - Service Tax

Classification of Services - Business auxiliary services or Information Technology Service?- Whether assessees are liable to service tax under Business Auxiliary Service on the amount of commission and other remuneration received by eBIZ during the period 1-7-2003 to 31-3-2007? Held that - On going through Agreement between eBIZ assessee and also activities undertaken by the assessee, there is no doubt that assessees are involved in promotion or marketing of services of eBIZ and getting commission for the eBIZ for the same - as per explanation given under Section 65(19) Information Technology Service means any service in relation to designing, developing or maintaining of computer software or computerised data processing or system networking - the activities of the assessees are not covered under any of the activity defined under Information Technology Service - the finding of the Commissioner (Appeals) that assessees are providing BAS and not Information Technology Service is upheld. Benefit of N/N. 13/2003, dated 1-3-2003 - Held that - From going through the copy of the agreement between the assessee and M/s. eBIZ it is noticed that the activity of the assessees are more than the commission agent and moreover the assessee is also getting the commission in this case for purchase of goods not by the assessee but by his orbit of the associates. Also this notification applies to sale and purchase of goods whereas the present assessees are also engaged in promoting the sale and purchase of the services - benefit of notification cannot be allowed. Extended period of limitation - Held that - The assessees failed to get themselves registered with the service tax department and they did not make any payment of service tax within the prescribed time and did not file the prescribed returns in time as required under the service tax law - extended period rightly invoked. Penalties - Held that - The benefit of penalty equal to 25% of the tax amount is also not applicable to the assessees as they have not paid 25% of the tax amount as penalty within one month from the date of the order - penalty u/s 76 and 78 also upheld. However, the benefit of cum-tax value is available to the assessees Appeal allowed in part.

Summary

Issues:
Whether assessees are liable to service tax under Business Auxiliary Service for the commission received from eBIZ during July 2003 to March 2007.

Analysis:
The case involved ten appeals, five each filed by the assessee and the Revenue, against Orders-in-Appeal. The assessees, working as Gold Deplomat Associates of eBIZ Pvt. Ltd., were providing services by selling products/packages, explaining market plans, and training new associates. The department alleged that the assessees were providing taxable services to eBIZ under Business Auxiliary Service. Show Cause Notices were issued, and penalties were imposed by the original authority, which were confirmed by the Commissioner (Appeals) except for penalties under Section 76 of the Act.

The main issue was whether the assessees were liable to service tax under Business Auxiliary Service for the commission and remuneration received from eBIZ. The definition of Business Auxiliary Service under Section 65(19) was crucial in determining the tax liability. The Tribunal examined the activities of the assessees and concluded that they were promoting or marketing eBIZ services and receiving commission, thereby providing Business Auxiliary Service and not Information Technology Service.

The assessees argued that they were commission agents and thus exempt under Notification No. 13/2003. However, the Tribunal found that the assessees' activities exceeded those of a commission agent and were not solely related to the sale and purchase of goods, as they were also involved in promoting services.

Regarding the imposition of penalties, the Tribunal upheld the invocation of the extended period of limitation due to the assessees' failure to register, pay taxes, and file returns on time. The Tribunal also rejected the contention that penalties should not be imposed if the tax amount along with interest was paid before the Show Cause Notice.

The Tribunal clarified that penalties could be imposed under both Sections 76 and 78 of the Finance Act for the period before the amendment of Section 78. The Tribunal allowed the benefit of cum-tax value to the assessees based on the consideration received from the service recipient.

In conclusion, the Tribunal partly allowed the appeals filed by the assessees regarding cum-tax value but rejected other issues. The appeals filed by Revenue regarding penalties under Section 76 were allowed. Misc. applications were dismissed as infructuous.