2010 (5) TMI 485 - AT - Service Tax

Demand - commission received for marketing of business - adjudicating authority demanded service tax on balance sheet figure prepared on the basis of bill raised while service tax was applicable on receipt basis on realization of commission income which was not tenable - original adjudicating authority considered only the contention regarding agency and he did not discuss the issue relating to the correctness of the amount worked out by the department - matter remanded to the original adjudicating authority

Summary

Issues:
1. Liability to pay service tax on commission received for marketing of business.
2. Liability for service tax on rate difference credit not received from supplier under Business Auxiliary Service.
3. Liability for service tax on turnover bonus received as part of trading activities.

Analysis:
1. The case involved the issue of the appellants' liability to pay service tax on the commission received for marketing their business. The department observed discrepancies in the income reported by the appellants in their income-tax returns and the income reflected in their service tax returns. The appellants argued that the service tax should be calculated on a receipt basis rather than a billing basis. They also claimed to have paid service tax on commission party account post availing exemption benefits. The adjudicating authority had demanded service tax based on the balance sheet figures prepared on a billing basis. The consultant representing the appellants contended that the adjudicating authority did not consider all factual details and applicable legal provisions, leading to an incorrect demand of service tax. The matter was remanded for a fresh decision, allowing the appellants to produce documentary evidence and make fresh submissions.

2. Another issue raised was the liability of the appellants for service tax on rate difference credit not received from their supplier under the category of Business Auxiliary Service. The appellants argued that the rate difference on direct sale, which was considered as commission, was related to their trading business and arose due to price fluctuations. They claimed that the adjudicating authority did not properly analyze the nature of the service liable for service tax. The consultant suggested that the correct calculation of service tax on a receipt basis would significantly reduce the duty demand, which the appellants had already paid. The matter was remanded for a fresh adjudication to consider all submissions and factual details.

3. The third issue involved the liability of the appellants for service tax on turnover bonus received as part of their trading activities. The appellants contended that the adjudicating authority did not thoroughly discuss the correctness of the amount calculated by the department and rejected their submissions without proper consideration. They requested a remand for a fresh decision on merit, emphasizing that certain submissions were not adequately addressed. The Tribunal found merit in the submissions made by the appellants and remanded the matter to the original adjudicating authority for a well-reasoned decision after allowing the appellants to present documentary evidence and fresh submissions. The requirement for a pre-deposit of the balance amount of service tax and penalty was waived, and the appeal was taken up for further consideration.