2015 (8) TMI 798 - AT - Service Tax

Business Auxiliary Service - small service exemption - Brand name - Distributors of Amway - wilful misstatement or suppression of facts - Invocation of extended period of limitation - Held that - Marketing or sale promotion of branded products by a person/ commission agent does not amount to providing branded service by him and hence, marketing or sales promotion of a branded product does not come under the exclusion category as mentioned in the proviso to notification no.6/05-ST - Decision in the case of Mr. Charanjeet Singh Khanuja And Others Versus CST, Indore/Lucknow/Jaipur/Ludhiana And Others 2015 (6) TMI 585 - CESTAT NEW DELHI followed - matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Time-barred demand due to extended period.
2. Applicability of business auxiliary service.
3. Interpretation of service tax on commission received.
4. Taxability of commission based on sales group performance.
5. Taxability of service provided by individuals.
6. Eligibility for duty exemption under notification no.5/2006-ST.

Analysis:
1. The appellant raised contentions regarding the time-barred demand due to the extended period and lack of wilful misstatement. The issue of the extended period was addressed, stating confusion in the Revenue Department during the relevant period. The Ld. DR acknowledged previous CESTAT decisions and recommended remanding the case for de-novo adjudication based on those judgments.

2. The core issue revolved around the applicability of business auxiliary service to the appellant's activities. The CESTAT order dated 09/06/2015 highlighted that the appellant's role as a distributor did not constitute promotion, marketing, or sale of goods belonging to the client. The sale of goods purchased by distributors from the client did not amount to a service provided to the client, thereby exempting them from service tax on profits earned from retail sales.

3. The interpretation of service tax on the commission received by the appellant was crucial. The CESTAT order differentiated between commissions linked to the distributor's own purchases and those linked to the sales group's performance. It emphasized that service tax should be charged only on the commission related to the sales group's purchases, warranting a remand for quantifying the tax demand accurately.

4. The taxability of commission based on the sales group's performance was discussed in detail. The judgment clarified that commissions linked to the sales group's performance constituted consideration for business auxiliary service, attracting service tax. However, the need to distinguish between commissions based on individual purchases and group purchases was highlighted for precise tax calculation.

5. The issue of whether individuals could be treated as commercial concerns for service tax purposes was deliberated. The judgment rejected the argument that only commercial concerns were taxable entities, emphasizing that individuals engaged in commercial activities should be treated as business concerns. It clarified that even prior to 1.5.2006, business auxiliary services provided by individuals were taxable.

6. Lastly, the eligibility for duty exemption under notification no.5/2006-ST was discussed. The judgment clarified that distributors promoting sales of branded products were not providing branded services, making them eligible for the exemption. The matter was remanded for further examination of the distributors' eligibility for the exemption.

In conclusion, the CESTAT waived the pre-deposit requirement, set aside the impugned order-in-appeal, and remanded the case to the original adjudicating authority for de-novo adjudication in line with the CESTAT order dated 09.06.2015, addressing the various issues raised by the appellant comprehensively.