2014 (8) TMI 511 - AT - Service Tax

Business Auxiliary Service - Receipt of commission or trading activity - Held that - Notwithstanding the claim by the appellants to be a canalizing agent, the transactions between NMDC and the appellants are in the nature of purchase and sale as duly recorded by the Commissioner. This is also the view held by the Sales Tax Department and Income Tax Department. Therefore, we do not, prima facie, treat the profit earned by the appellants as consideration towards service rendered to NMDC - Therefore, there shall be waiver of predeposit of dues as per the impugned order and stay of recovery thereof till the disposal of the appeal - Stay granted.

Summary

Issues: Nature of activities between the canalizing agent and NMDC, classification of the 3% amount retained by the appellants, determination of whether the amount retained constitutes 'Business Auxiliary Service (BAS)', applicability of service tax, interpretation of transactions as sale & purchase or commission, reliance on Sales Tax and Income Tax Tribunal decisions, waiver of predeposit of dues.

Analysis:
1. Nature of Activities and Classification of Retained Amount:
The judgment addresses the nature of activities between the canalizing agent and NMDC, highlighting that all exports are conducted in the name of the canalizing agent, with export proceeds realized through Letter of Credit. The Commissioner classified the 3% amount retained by the appellants as commission, based on the Committee of Secretaries' minutes. This classification led to the demand of service tax under 'Business Auxiliary Service (BAS)' and imposition of penalties.

2. Arguments and Rulings on Transaction Nature:
The appellants contended that the transactions with NMDC were of sale & purchase nature, supported by Sales Tax authorities and Income Tax Appellate Tribunal decisions. They argued that the amount earned should not be considered as commission, and no TDS was deductible at NMDC's hands. The Tribunal analyzed the submissions and records, agreeing with the appellants that the transactions were indeed sale and purchase, in line with the Sales Tax and Income Tax Department's views. Consequently, the profit earned by the appellants was not treated as consideration for services rendered to NMDC.

3. Waiver of Predeposit and Stay of Recovery:
Based on the findings that the transactions were sale and purchase, the Tribunal decided in favor of the appellants. It acknowledged the waiver of predeposit of dues as per the impugned order and stayed the recovery until the appeal's disposal. This decision was crucial in providing relief to the appellants pending the final outcome of the appeal process.

In conclusion, the judgment from the Appellate Tribunal CESTAT Bangalore delves into the intricate details of the nature of activities between the canalizing agent and NMDC, the classification of the retained amount, and the ultimate determination of the transactions as sale and purchase. By considering submissions, departmental views, and legal precedents, the Tribunal provided a comprehensive analysis leading to the waiver of predeposit and stay of recovery, offering a favorable outcome for the appellants in this service tax dispute.