2011 (10) TMI 437 - AT - Service Tax

Waiver of pr-deposit - Business auxiliary services - Circular No. 96/7/2007-S.T., dated 23-8-2007 - learned advocate submits that it is recipient of such services, which is liable to pay service tax in terms of the above rule - Held that there is no legal dispute about the taxability of the commission earned by mutual fund distributor. The core question required to be decided is as to whether the same is to be paid by mutual fund distributor or the mutual fund companies - In terms of provisions of Rule 2(1)(d)(vi), we find that such liability stands shifted to the recipient of the services i.e. the mutual fund company - there is no documentary evidence produced on record reflecting payment of Service tax by mutual fund companies is not appropriate inasmuch as in terms of the above rule, the liability to pay service tax is that of mutual fund company - Decided in favor of the assessee by waay of remand to original adjudicating authority for de novo decision

Issues: Taxability of commission earned by a mutual fund distributor under business auxiliary services.

Analysis:
1. Issue of Taxability of Commission: The case involved the taxability of the commission earned by a distributor of mutual fund units under business auxiliary services. The authorities below taxed the commission received by the distributor on the grounds of providing services to the mutual fund companies. The advocate for the appellant argued that as per Rule 2(1)(d)(vi), the recipient of such services, i.e., the mutual fund company, is liable to pay the service tax. The advocate highlighted that this legal issue was not addressed by the Commissioner (Appeals) previously due to the lack of a filed reply.

2. Board's Circular and Legal Interpretation: The Revenue referred to Circular No. 96/7/2007-S.T., dated 23-8-2007, stating that distributors receiving commission for distributing mutual fund units are liable to service tax under business auxiliary services. The Revenue argued that the commission received by the distributor falls under the category of business auxiliary services based on the Board's clarification. Additionally, the Commissioner (Appeals) noted the absence of evidence showing that the mutual fund companies had paid the service tax.

3. Decision and Legal Interpretation: Upon careful consideration, the Tribunal found no legal dispute regarding the taxability of the commission earned by the distributor. The crucial question was determining the party responsible for paying the service tax, either the distributor or the mutual fund companies. Referring to Rule 2(1)(d)(vi), the Tribunal concluded that the liability for paying the service tax shifted to the recipient of the services, i.e., the mutual fund companies. The Tribunal disagreed with the Commissioner (Appeals) for not addressing this legal issue and clarified that the lack of evidence of the mutual fund companies paying the service tax does not transfer the liability to the distributor.

4. Remand for De Novo Decision: The Tribunal observed that the lower authorities did not adequately address the legal issues raised. Consequently, the Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for a fresh decision. The appellant was granted the opportunity to raise the issue before the original adjudicating authority, ensuring a fair hearing. The stay petition and appeal were disposed of accordingly.

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