2015 (9) TMI 258 - AT - Service Tax

Amway distributor - Receipt of commission - Bonafide belief - Held that - Respondent is an individual; an individual cannot be faulted if she thought that she was only a dealer; a difference between the purchase price and the sale price or MRP is available to her and therefore, it cannot be said that there was an intention to evade service tax. The only problem has arisen because the company has called such amount as commission whereas she simply sold the goods to the person who asked a product at a particular MRP. Therefore, the Commissioner s conclusion is correct position and the conclusion in the circumstances considered cannot be faulted with - since there is no malafide intention, extended period of limitation cannot be invoked - Decided against Revenue.

Summary

Issues: Appeal against setting aside penalty imposed on respondent by the Commissioner (Appeals) for service tax on commission and incentive received as an 'Amway' distributor.

The judgment involves an appeal by the Revenue against the setting aside of a penalty imposed on the respondent, who is an 'Amway' distributor, for service tax on commission and incentive received. The respondent claimed that the amount received was not commission but a difference between actual price and selling price of products, along with incentives based on performance criteria set by 'Amway.' The Revenue argued that the commission and incentive should be subject to service tax under 'Business Auxiliary Service' as the respondent was engaged in promoting or marketing 'Amway' products.

The advocate for the respondent contended that despite not being liable to pay tax, the respondent paid service tax and interest under protest before a show-cause notice was issued. The notice alleged suppression and violation of provisions with an intent to evade duty and tax, leading to the confirmation of service tax and interest.

The Tribunal observed that the respondent, being an individual, cannot be faulted for assuming she was only a dealer, as the amount received was a difference between purchase price and MRP. The issue arose because 'Amway' labeled the amount as commission, whereas the respondent simply sold goods at the MRP. The Tribunal agreed with the Commissioner (Appeals) that there was no intention to evade service tax, as evident from the lack of evidence showing malafide activity or steps to evade tax. The Commissioner's order highlighted the absence of specific allegations or evidence indicating an intention to evade tax, emphasizing that the liability was discharged promptly upon departmental notification.

Consequently, the Tribunal found no merit in the Revenue's appeal and rejected it. The judgment underscores the importance of considering the circumstances and intentions of the taxpayer in tax liability cases, emphasizing the need for evidence of deliberate evasion to impose penalties under the law.