2014 (1) TMI 96 - AT - Service Tax

Demand of service tax - Business Auxiliary Service - Management Consultancy Services - Supply of manpower - Held that - appellant entered into contract with M/s.Futura Polymers Ltd to transfer their Commercial Division. During the agreement period agreement could not be implemented immediately and during the intervening period the appellant also provided necessary for Management of the Commercial Division - appellant had collected the service tax and has been paid also. As the appellant had undertaken the activity in respect of Management of the Commercial division which was transferred to M/s Futura Polymers Ltd - appellant had received commission of 1% in respect of sale of goods - appellants are not liable to pay service tax in view of the provisions of Notification No. 13/2003-ST - Demand and penalty is set aside - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of demand for Business Auxiliary Service
2. Confirmation of demand for Management Consultancy Services
3. Penalty imposition for non-deposit of service tax

Analysis:
1. Confirmation of demand for Management Consultancy Services:
The appellant contested the demand of Rs. 5,59,518 on the grounds that they did not provide Management Consultancy Services but only supplied manpower. However, it was found that during an agreement with M/s.Futura Polymers Ltd for transferring their Commercial Division, the appellant provided necessary management services during the intervening period. The appellant had collected and paid the service tax for these services. As the activity related to the management of the Commercial Division, the demand was deemed valid. The Tribunal upheld the demand and imposed a penalty equal to the confirmed amount.

2. Penalty imposition for non-deposit of service tax:
Regarding the penalty for not depositing the service tax collected, it was noted that the appellant had collected the tax but failed to deposit it initially. Upon notification by the Revenue, the amount was then deposited. The Tribunal considered that a penalty equal to the demand would serve the interests of justice. Therefore, the appellants were held liable for a penalty equal to the confirmed demand amount.

3. Confirmation of demand for Business Auxiliary Service:
The demand of Rs. 7,68,266 for Business Auxiliary Service was challenged by the appellant, claiming they acted as a commission agent procuring materials for their client and receiving service charges. The Revenue argued that the services provided fell within the scope of Business Auxiliary Service as per the relevant provisions. The Tribunal found that the appellant received a commission of 1% for the sale of goods, which aligned with the definition of a commission agent under Notification No. 13/2003-ST. Consequently, the demand for Rs. 7,68,266 was set aside, along with the penalties imposed.

In conclusion, the Tribunal disposed of the appeal by confirming the demand for Management Consultancy Services, imposing a penalty equal to the confirmed amount, and setting aside the demand for Business Auxiliary Service along with the associated penalties.