2016 (12) TMI 1062 - AT - Service Tax

Providing multi level marketing (MLM) services to the principle - whether Business Auxiliary Services or not? - Time limitation - Held that - We find that the issue of multi level marketing falling under the category of Business Auxiliary Services stands finally concluded by the Tribunal in the case of Charanjeet Singh Khanuja Vs. CST Indore 2015 (6) TMI 585 - CESTAT NEW DELHI . However, in the same very decision, the Tribunal has observed that since there was bonafide belief in the industry itself and in as much as two views stands held by the department itself regarding taxability of activity, longer period of limitation would not be available to the Revenue. She submits that the entire demand against Shri Sunil Wadhwa would fall outside the normal period of limitation. However, demand against Mrs. Neela Wadhwa is within the limitation period. However, he submits that penalty imposed upon Mrs. Neela Wadhwa under section 78 of the Act may be set aside, in as much as there was no suppression on her part with an intention to evade demand of service tax. In view of the above we set aside the orders and allow the appeal of Shri Sunil Wadhwa on limitation. In respect of the appeal of Mrs. Neela Wadhwa, we remand the matter to the lower authorities for re-quantification of the demand falling within the limitation period after examining the applicability of the small scale industry notification number 08/2008. As regards penalty, we agree with Ld. Advocate that section 78 penalty is invokable when there is fraud with an intention to avoid payment of duty. As we have also observed that there was bonafide belief in the industry itself, imposition of penalty under the said section would not be justified. Accordingly, by confirming the demand against Mrs. Neela Wadhwa, we set aside the penalty imposed upon her. Her appeal is allowed accordingly. Appeal allowed by way of remand.

Summary

Issues:
1. Confirmation of demand of duty for providing multi level marketing services under 'Business Auxiliary Services' liable to service tax.
2. Bar of limitation for demand issued after the period involved.
3. Applicability of small scale industry exemption notification.
4. Conclusion on multi level marketing falling under 'Business Auxiliary Services' and limitation period for different individuals.
5. Setting aside orders and allowing appeals based on limitation and re-quantification of demand.
6. Imposition of penalty under section 78 for fraud and intention to avoid payment of duty.
7. Disposal of both appeals.

Analysis:
1. The judgment addresses the confirmation of demand of duty against the appellant for providing multi level marketing services falling under 'Business Auxiliary Services,' which were subject to service tax. The Tribunal found the demand justified for the period April 2004 to March 2009.

2. The issue of limitation arose concerning the demand issued on 22.10.2009 for the period from 01.04.2004 to 31.03.2009. The appellant argued that the demand was time-barred due to the involvement of different individuals during the period in question.

3. The appellant claimed the small scale industry exemption notification benefit for the period when Mrs. Neela Wadhwa provided the services after Shri Sunil Wadhwa's tenure until 31.03.2008. The Tribunal was tasked with examining the applicability of notification number 08/2008 in this context.

4. The Tribunal referred to a previous decision on multi level marketing falling under 'Business Auxiliary Services' and the limitation period for different individuals involved. It was noted that the demand against Shri Sunil Wadhwa fell outside the normal limitation period, while the demand against Mrs. Neela Wadhwa was within the limitation period.

5. Orders were set aside, and the appeal of Shri Sunil Wadhwa was allowed based on limitation. For Mrs. Neela Wadhwa, the matter was remanded to lower authorities for re-quantification of the demand falling within the limitation period, considering the small scale industry exemption notification.

6. Regarding penalties, the Tribunal considered the imposition under section 78 for fraud and intention to avoid duty payment. Given the bonafide belief in the industry and absence of suppression to evade service tax, the penalty imposed on Mrs. Neela Wadhwa was set aside, aligning with the decision to confirm the demand against her.

7. Both appeals were disposed of accordingly, with the operative part of the order pronounced in open court.