2018 (7) TMI 1951 - AT - Service Tax

Business Auxiliary services - services of promoting sale of goods - agent-principal relationship - demand of service tax - HELD THAT - The sub-brokers and stock-brokers are agent and principal. Asking the appellants to pay Service Tax shall amount to double taxation since as per the declarations of the mutual fund distributors the asset management companies have made the payment of commissions to the mutual fund distributors after deduction of Service Tax at source. Revenue has not suffered any loss due to discharge of tax liability by the asset management companies. There shall be no levy of tax on the present appellants. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay Service Tax under the category of "Business Auxiliary Service" for commissions received.
2. Applicability of Reverse Charge Mechanism for Service Tax payment.
3. Classification of services provided to mutual fund distributors.
4. Possibility of double taxation in the case.

Analysis:
1. The case involved the liability of the manufacturing company to pay Service Tax under the category of "Business Auxiliary Service" for the commissions received from mutual fund distributors. The Adjudicating Authority had confirmed the demand of Service Tax along with interest and penalties, leading to the appeal before the Tribunal.

2. The appellant argued that they were providing services to mutual fund distributors under the Reverse Charge Mechanism, contending that no Service Tax was payable by them on the commissions received. They highlighted that they did not collect any Service Tax from the investors and that their services were covered under this mechanism.

3. The appellant further contended that the services provided to the mutual fund distributors were not procurement of goods or services that are inputs for the client, challenging the classification under "Business Auxiliary Service" as defined in the Finance Act, 1994. They emphasized their role as intermediaries and members of the Association of Mutual Funds in India.

4. The Tribunal examined the declarations submitted by the mutual fund distributors, indicating that the commissions received were after deduction of Service Tax at source. The Tribunal observed that the Service Tax Law does not allow for double taxation and that the Revenue had not suffered any loss due to the tax already discharged by the asset management companies. Therefore, the Tribunal concluded that there should be no levy of tax on the appellants to avoid double taxation.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal filed by the appellant with consequential benefits. The judgment emphasized the principles of the single point tax law, the Reverse Charge Mechanism, and the prevention of double taxation in the context of Service Tax liability for commissions received from mutual fund distributors.