2012 (9) TMI 104 - AT - Service Tax

Demand of service tax along with confirmation of interest and imposition of penalty - alleged that appellants have received commission from cell phone Held that - Assessee submitted that the excess amount, which stands confirmed by the Revenue as commission, is actually the profit earned by them on account of sale of mobile phones, on which they have already paid sales tax - denial of benefit SSI exemption - assuming that the differential amount was not on account of sale/purchase of mobiles and that the total clearance value during the preceding financial year was more than Rs.4 lakhs - matter remanded to original adjudicating authority

Summary

Issues:
1. Confirmation of service tax against the appellant.
2. Imposition of penalty and interest.
3. Contestation of Show Cause Notice on merits and limitation.
4. Rejection of differential amount as profit on sale of mobile phones.
5. Denial of small scale notification benefit.
6. Verification of factual position by the Commissioner (Appeals).

Confirmation of Service Tax:
The Appellate Tribunal noted that service tax of Rs. 63,000 was confirmed against the appellant, along with interest and penalty, based on the discrepancy between the commission received from cell phone companies and the amount declared in the ST-3 returns. The Show Cause Notice proposed the demand of differential service tax and penalty.

Contestation of Show Cause Notice:
The appellant contested the Show Cause Notice on merits and limitation. They argued that the excess amount confirmed as commission was actually profit from the sale of mobile phones, on which they had already paid sales tax. They also claimed entitlement to the small scale Notification No. 6/2005-ST. The demand was challenged on the grounds of limitation and lack of mala fide intention.

Rejection of Differential Amount as Profit:
The Commissioner (Appeals) rejected the appellant's plea that the differential amount was profit from the sale of mobile phones due to a lack of documentary evidence supporting this claim. The rejection was based on the absence of trading documents like sales and purchase accounts for the traded goods.

Denial of Small Scale Notification Benefit:
While the Commissioner (Appeals) acknowledged that the service provided by the appellant did not qualify as branded service, he denied the benefit of the small scale exemption under Notification No. 6/2005-ST. This denial was due to the failure to establish that the total value of services provided by the appellant during the preceding financial year was less than Rs.4 lakhs.

Verification of Factual Position:
The Appellate Tribunal found that the grounds for denial of benefits by the Commissioner (Appeals) were based on factual positions that required verification. They emphasized the need for verification at the original level by the field officer to ascertain whether the differential amount was related to the sale/purchase of mobile phones and if the total clearance value exceeded Rs.4 lakhs. Therefore, the matter was remanded to the original adjudicating authority for a fresh decision after verifying the facts, with the plea of limitation left open for reconsideration in the new proceedings.