2010 (9) TMI 295 - AT - Service Tax

Waiver of pre-deposit - demand of overriding commission - case of the same assessees about one-third of the demand has been directed by way of pre-deposit - agency incentives, the Commissioner has given a finding rejecting the plea of the assessees that incentives received would not form part of the taxable value for the reason that the money was received towards incentives and only entries were made in the books of accounts without providing any service - assessees making entries in the books of accounts would not arise unless such incentives had been received by the assesses part pre-deposit waived

Summary

Issues:
1. Application for waiver of pre-deposit of service tax
2. Demand on overriding commission and agency incentives

Analysis:

Issue 1: Application for waiver of pre-deposit of service tax
The judgment pertains to an application for waiver of pre-deposit of service tax amounting to Rs. 1,31,45,172 along with interest and penalty. The demand primarily arises from overriding commission paid to the assessees, who act as general sales agents for foreign airlines. The tribunal considered the previous stay orders issued in similar cases involving the assessees and directed a pre-deposit of Rs. 35 lakhs within 8 weeks, with the balance tax and penalties waived upon compliance. Failure to adhere to this directive would result in the vacation of stay and dismissal of the appeals without prior notice.

Issue 2: Demand on overriding commission and agency incentives
Regarding the demand related to overriding commission, the tribunal noted the previous stay orders that directed a pre-deposit of about one-third of the demand. In the case of agency incentives, the Commissioner rejected the assessees' argument that the incentives received should not be taxable as they were merely entries in the books of accounts without any corresponding service provided. The Commissioner emphasized that the receipt of incentives by the assessees was a prerequisite for making entries in the books of accounts. Given the debatable nature of the contention that no tax is leviable on agency incentives, the tribunal directed the specified pre-deposit amount, taking into account the earlier stay orders and the complexity of the issue.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Chennai addressed the application for waiver of pre-deposit of service tax and the demand on overriding commission and agency incentives. The tribunal considered past stay orders, the nature of the demands, and the arguments presented by both sides before issuing the directive for pre-deposit and waiver, emphasizing compliance within the stipulated timeframe to avoid adverse consequences.