2011 (9) TMI 821 - AT - Service Tax

Waiver of pre-deposit - applicant has received the entire amount from the company whose products/ brands were endorsed by the celebrities and paid service tax on the entire amount under Event Management category. Out of the amount received from the company whose products/ brands were endorsed they have retained 20% of the amount with them as their commission Demand of service tax as Business Auxiliary Services on 20% of the commission so retained by the applicant, along with interest and imposed penalties Held that - question of treating 20% of the amount retained by them as representing payment for another service rendered by them to the celebrities may not arise. Further, we also find, prima-facie, merit in the submission of the ld. Chartered Accountant that it would be a case of revenue neutrality in the event of service tax charged on the 20% of the amount retained by them. Waiver of pre-deposit allowed

Summary

Issues:
Interpretation of service tax liability on commission retained by the applicant under 'Business Auxiliary Services' category.

Analysis:
The case involved a dispute where the applicant had entered into agreements with celebrities to endorse products/brands, receiving payments from companies and paying service tax under 'Event Management' category on the entire amount. The issue arose when the Commissioner demanded service tax on 20% of the commission retained by the applicant under 'Business Auxiliary Services'. The applicant argued that they had already paid service tax on the total amount received, including the commission, and that treating a part of it as a separate service did not apply. The Chartered Accountant representing the applicant contended that any additional service tax, if applicable, should be considered neutral as it could be offset against the total service tax paid.

Upon hearing both sides, the judges noted that the applicant had paid service tax on the full amounts received from companies for product endorsements. They found no immediate need to consider the 20% commission retained as payment for a separate service provided to the celebrities. The judges acknowledged the Chartered Accountant's argument regarding revenue neutrality if service tax was to be imposed on the 20% commission. Consequently, the tribunal decided to waive the pre-deposit of amounts in question and stayed the recovery until the appeal's final disposal, indicating a favorable stance towards the applicant's position.

In conclusion, the judgment primarily focused on the interpretation of service tax liability concerning the commission retained by the applicant under the 'Business Auxiliary Services' category. The tribunal leaned towards the applicant's argument of having already paid service tax on the total received amount, suggesting that treating the 20% commission as a separate taxable service might not be necessary. The decision to waive the pre-deposit and stay recovery reflected the tribunal's initial assessment of the case's merit and the potential for revenue neutrality.