2015 (10) TMI 2000 - AT - Service Tax

Liability of Service Tax BAS - direct service tax liability or not due to reverse charge on recipient of services Received brokerage from LIC Distributor for providing service of distribution of mutual - Service tax liability was on the recipient under Rule 2(1)(d)(vi) Department contends that Appellant was not a distributor of mutual fund or an agent of such distributor and therefore Rule 2(1)(d)(vi) is not applicable thus liable to service tax. Held That - Appellant was not distributor of mutual fund or agent thereof; was promoting and marketing the services provided by LIC Distributor and in no way was involved in distribution of mutual fund; service rendered was covered under BAS Contention of Appellant that it was under bona fide belief that it was not liable to service tax is totally untenable Demand confirmed invoking extended period of limitation - Decided against the assessee.

Issues:
1. Appellant's liability to pay service tax under Business Auxiliary Service (BAS) for receiving commission.
2. Appellant's contention as an agent of M/s. Zealous Financial Services (P) Ltd.
3. Invocation of extended period of limitation.
4. Applicability of Rule 2(1)(d)(vi) in relation to business auxiliary service of distribution of mutual fund.
5. Whether the appellant was a distributor of mutual fund or agent thereof.
6. Applicability of SEBI Regulations in determining the status of the appellant.
7. Benefit of Notification No.13/2003-ST on BAS rendered by a commission agent.
8. Allegations of suppression of facts with intention to evade service tax.

Analysis:

1. The appeal was filed against the Order-in-Appeal confirming a service tax demand on the appellant for receiving commission from M/s. Zealous Financial Services (P) Ltd. for mobilizing customers to invest in LIC Index Nifty Fund. The appellant contended that the service tax liability was on the recipient of service under Rule 2(1)(d)(vi) and there was no suppression or wilful mis-statement on its part.

2. The appellant argued that it was an agent of M/s. Zealous Financial Services (P) Ltd. and cited relevant judgments to support its position that if the main contractor discharges the service tax liability, there is no need for the sub-contractor to pay the service tax. However, the Departmental Representative contended that the appellant was not a distributor of mutual fund or an agent of such distributor.

3. The issue of the invocation of the extended period of limitation was raised by the appellant, stating that there was no wilful mis-statement or suppression of facts. The appellant believed it was not liable to pay service tax and cited judgments to support its argument against the extended period of limitation.

4. The Tribunal analyzed the appellant's status in relation to the distribution of mutual funds and found that the appellant was not acting as a distributor or agent of mutual funds. SEBI Regulations were referred to in determining the appellant's status, highlighting the requirement for intermediaries to be registered for selling or marketing mutual funds.

5. The Tribunal noted that the appellant was only promoting and marketing services provided by M/s. Zealous Financial Services (P) Ltd. and was not involved in the distribution of mutual funds. The service rendered by the appellant was considered to fall under Business Auxiliary Service (BAS) as per Section 65(19) of the Finance Act, 1994.

6. The Tribunal highlighted that the appellant had admitted to being a commission agent availing the benefit of Notification No.13/2003-ST, exempting BAS rendered by a commission agent from service tax. With the rescinding of the exemption, the appellant became liable to pay service tax, indicating awareness of the change in tax liability.

7. The Tribunal found that the appellant's contention of being under a bona fide belief that it was not liable to service tax was untenable. It concluded that suppression of facts with the intention to evade service tax was evident, dismissing the appeal and the stay application filed by the appellant.

In conclusion, the Tribunal upheld the service tax demand on the appellant, emphasizing the appellant's awareness of the change in tax liability and the deliberate choice not to pay service tax, leading to the dismissal of the appeal.

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