2015 (4) TMI 429 - AT - Service Tax

Business Auxiliary Service - Receipt of commission from the financial institutions/banks - Imposition of penalty and penalty - Held that - assessee did not contest the issue on merits before the adjudicating authority. - appellant having not contested the issue on merits before the adjudicating authority cannot do so before us Amounts which have been received by them from financial institutions/banks as commission are lump sum amounts and the said amounts can be considered as cum tax amount and the service tax liability needs to be reworked. Claim of the appellant is correct and needs to be considered as cum tax amount; upholding the service tax liability has having been conceded before the adjudicating authority we direct the lower authorities to rework out the service tax liability and the interest thereof. CBE accordingly we invoke the provisions of Section 80 and set aside the penalties imposed on the appellant - Decided partly in favour of Revenue.

Summary

Issues:
1. Service tax liability on commission received by the appellant/assessee.
2. Imposition of penalties under Section 76 of the Finance Act, 1994.

Analysis:

Issue 1: Service Tax Liability
The appellant was involved in facilitating customers to avail loans for purchasing vehicles and receiving commission from banks/financial institutions. Revenue authorities claimed service tax liability on this commission under "Business Auxiliary Services" from 01/07/2003. The appellant contested the issue on merits and limitation. The adjudicating authority confirmed the demands, penalties, and interest. The appellant discharged the service tax liability for the entire period during the interim. The Revenue appealed against the penalty imposed, while the appellant contested the issue on merits. The appellant's counsel argued that the tax liability was incorrect based on a CBEC Circular stating doubts on the taxability of such commissions. The counsel raised concerns about the tax liability calculation and the need to consider the commission as cum-tax amount. The Revenue argued that the appellant did not contest the taxability before the adjudicating authority and that the activities fell under business auxiliary services. The tribunal found that the appellant did not contest the issue on merits before the adjudicating authority and upheld the tax liability and interest. However, the tribunal directed the lower authorities to rework the service tax liability considering the commission as cum-tax amount.

Issue 2: Imposition of Penalties
Regarding the penalties imposed under Section 76 of the Finance Act, 1994, the tribunal noted that the issue of service tax liability under Business Auxiliary Services was disputed with various views. A CBEC Circular clarified the taxability of commissions received from financial institutions/banks. As the period in question was before the circular's issuance, the tribunal invoked Section 80 of the Finance Act, 1994, and set aside the penalties imposed on the appellant. The tribunal disposed of the appeal based on the considerations mentioned above.

In conclusion, the tribunal upheld the tax liability and interest but directed a reworking of the service tax liability considering the commission as cum-tax amount. The penalties imposed were set aside invoking Section 80 of the Finance Act, 1994.