2013 (7) TMI 554 - AT - Service Tax

Nature of service Market Research Agency Service u/s 65(69) - whether the activities fall under Market Research Agency Service as defined u/s 65(69) Held that - Activities of the assessee weremore in nature of promotion of sale of the goods and do not fall under the category of Market Research Agency Service - as per agreement assessee entitled to commission for the performance of their obligation of the aggregate amount of sale and the rate of commission may be increased or decreased for specific products after mutual agreement they were working merely as a commission Agent and their activities fall under Business Auxiliary Service decided in favour of assessee.

Summary

Issues:
1. Determination of whether the activities of the appellants fall under Market Research Agency Service.
2. Interpretation of the agreement between the appellants and M/s Aerotech India (P) Ltd.
3. Assessment of the obligations and activities of the appellants based on the agreement.
4. Analysis of the legal provisions defining Market Research Agency Service under the Finance Act.
5. Consideration of the arguments presented by both parties regarding the nature of services provided by the appellants.

The judgment revolves around an appeal filed by M/s J.J. Foam Pvt. Ltd. against an Order in Appeal passed by the Commissioner, Central Excise (Appeals), Ghaziabad. The case involved the collection of charges declared as commissions by the appellants from M/s Aerotech India (P) Ltd., leading to a dispute regarding whether the appellants' activities fell under Market Research Agency Service as per Section 65 of the Finance Act. The Assistant Commissioner confirmed the service tax demand, interest, and penalty imposed on the appellants, which was upheld by the Commissioner (Appeals), prompting the appellants to appeal to the Tribunal.

The advocate for the appellants argued that the services rendered should be classified as Business Auxiliary Service rather than Market Research Agency Service. He contended that the appellants acted as commission agents for procuring orders and providing details of commissions received. Additionally, he challenged the order on grounds of being time-barred and requested its reversal. On the other hand, the Additional Commissioner AR supported the lower authorities' decision, citing specific clauses in the agreement between the appellants and M/s Aerotech India (P) Ltd. to justify the classification under Market Research Agency Service.

Upon examining the agreement between the parties, the Tribunal found that the appellants were appointed as Sales Promotion Agents of M/s Aerotech India (P) Ltd. The obligations outlined in the agreement focused on supervising sales, promoting products, ensuring timely delivery, and handling expenses related to sales activities. Notably, the appellants were entitled to a commission based on the sales performance. The Tribunal concluded that the activities undertaken by the appellants primarily involved promoting the sale of goods, aligning more with Business Auxiliary Service rather than Market Research Agency Service as defined under the Finance Act.

The Tribunal referred to the legal definitions of Market Research Agency Service under Section 65 of the Finance Act, emphasizing that the activities of the appellants did not meet the criteria specified for such services. By analyzing the agreement and the nature of the appellants' responsibilities, the Tribunal determined that the appellants' role as Sales Promotion Agents focused on sales promotion and did not align with the characteristics of a Market Research Agency. Consequently, the impugned order was set aside, and the appeal by the appellant was allowed, highlighting the misclassification of services and the incorrect application of tax liabilities.