2016 (3) TMI 856 - AT - Service Tax

Liability of Service tax - Rendering of Business auxiliary service - Amounts received as commission agent subject to a minimum of ₹ 1,10,000/- per month falls within the definition of business auxiliary service in section 65 (19) of Finance Act, 1994 - Held that - the claim of the appellant for immunity from taxability under section 65(105) (zzb) is not tenable. Therefore, the impugned order is modified by recomputing the tax liability along with appropriate interest. Seeking setting aside of penalty imposed under Section 78 - Invokation of Section 80 - Whether the appellant is a commercial concern - Appellant contended that notwithstanding the title of the agreement, it had merely rented out space to M/s Style Spa and that the building space was owned by the kartha and co-parceners of the Hindu Undivided Family (HUF) as an asset which could not be considered as a commercial activity - Held that - HUFs can also be commercial concerns is no longer res integra as decided by Tribunal in the case of re Infinity Credit. Therefore, for reasonableness of doubt that individuals may not be commercial concerns , section 80 of Finance Act, 1994 be invoked and penalty imposed under Section 78 is set aside. Cum-tax computation - Rental of immovable property - Appellant is the custodian of the goods intended for sale - Held that - the remuneration that was to be made over to the appellant is based on quantum of sale. Guarantee of minimum payment of ₹ 1,10,000/- per mensem does not detract from the connection with sale. This is squarely within the ambit of commission agency which became taxable for non-agricultural produce in the hands of provider of business auxiliary service vide notification of 9 th July 2004. Appellant is eligible for exemption from February to July 2004. It is observed that, during the period of dispute, appellant was in receipt of only the minimum guaranteed amount of ₹ 1,10,000/-. The agreement also makes it clear that M/s Style Spa is responsible for discharge of tax liability. In view of these facts, the plea of the appellant for cum-tax computation is justified. - Appeal disposed of

Summary

Issues:
1. Liability of the appellant for service tax on 'business auxiliary service' for the period from February 2004 to April 2006.
2. Whether the appellant can be considered a 'commercial concern' for tax purposes.
3. Interpretation of the agreement between the appellant and M/s Style Spa.
4. Applicability of exemptions and notifications related to commission agents.
5. Calculation of tax liability, interest, and penalty under the Finance Act, 1994.

Analysis:
1. The appellant, M/s C M Sakpal, challenged the order demanding service tax of Rs. 2,77,200 for providing 'business auxiliary service' and interest, along with penalties under sections 77 and 78 of the Finance Act, 1994. The tax liability was based on amounts received as a 'commission agent' for exhibiting and selling products of M/s Style Spa.

2. The appellant argued that as a Hindu Undivided Family (HUF), they cannot be considered a 'commercial concern' for tax purposes. However, the Tribunal noted that HUFs can be commercial concerns, and the appellant's claim for immunity from tax under section 65(105)(zzb) was dismissed.

3. Despite the appellant's claim of merely renting out space to M/s Style Spa, the Tribunal found that the arrangement involved the appellant acting as a custodian of goods for sale, based on the quantum of sales. The agreement with M/s Style Spa was deemed to fall within the definition of a 'commission agency,' subject to taxation under the Finance Act, 1994.

4. The Tribunal considered relevant notifications exempting commission agents from tax for agricultural produce and later restricting the exemption to non-agricultural produce. The appellant was eligible for exemption from February to July 2004, as they only received the minimum guaranteed amount during the dispute period.

5. The impugned order was modified to recompute the tax liability to Rs. 2,03,634 along with interest. The penalty under Section 78 was set aside invoking section 80 of the Finance Act, 1994, considering the reasonable doubt regarding individuals being classified as 'commercial concerns.'

In conclusion, the Tribunal upheld the tax liability on the appellant for providing 'business auxiliary service,' clarified the appellant's status as a 'commercial concern,' and adjusted the tax liability, interest, and penalty based on the findings and exemptions under the Finance Act, 1994.