2015 (12) TMI 1009 - AT - Service Tax

Classification - distribution of salary by bank - Banking and other Financial Services or business auxiliary service - Held that - Lower authorities were in error in holding that appellant would fall under the category of commission agent and the amount received by them from the Government of Maharashtra through Zilha Parishad as service charges for disbursement of salaries of Govt. teachers cannot be considered as commission received, though it may be entered in the records of the appellant as commission received. - It may be seen from the reproduced definition the commission agent is defined as a person who while acting on behalf of other person undertakes the activity as mentioned herein above paras (a) to (d). None of the activities as indicated herein above is undertaken by the appellant as disbursement of salaries to the Govt. teachers would not fall in any of the activity, sale or purchase of goods or service. In our considered view, an amount received as a consideration for disbursement of salaries to the Govt. teachers on direction of Zillha Parishad can never be an activity covered under the definition of Business Auxiliary Service and more so it cannot be termed as an amount received by the appellant as commission agent. In view of the facts and circumstances of this case, we hold that the impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant's received commission for disbursement of Govt. teachers' salary falls under Business Auxiliary Services.
2. Whether the appellant can be categorized as a commission agent.
3. Whether the demand for service tax liability, interest, and penalties imposed by the adjudicating authority is valid.

Analysis:
1. The issue in this case revolves around the appellant providing services under Banking and other Financial Services, specifically regarding the commission received for disbursement of Govt. teachers' salary. The revenue authorities alleged that the commission falls under Business Auxiliary Services, leading to a show cause notice for service tax liability, interest, and penalties. The adjudicating authority confirmed the demand, which was upheld by the first appellate authority.

2. The appellant argued that the commission received does not fit the definition of commission and that disbursing the salary of Govt. teachers does not make them a commission agent. The tribunal analyzed the definition of a commission agent under the Finance Act, 2005, which involves activities related to sale or purchase of goods or services, payment collection, guarantees, or other related activities. The tribunal concluded that the appellant's disbursement of salaries does not align with any of these activities, thus not categorizing them as a commission agent.

3. After considering both sides' submissions, the tribunal found errors in the lower authorities' decision, stating that the appellant's activities do not fall under Business Auxiliary Services or commission agent definitions. The tribunal highlighted that the amount received for disbursement of salaries to Govt. teachers cannot be considered as commission received, leading to the decision to set aside the impugned order and allow the appeal. The tribunal held that the demand for service tax liability, interest, and penalties was unsustainable in this case.