2016 (12) TMI 1273 - AT - Service Tax

Taxability - commission received - business auxiliary services - Held that - reliance placed on the decision of the case of Surendra Singh Rathore 2013 (8) TMI 149 - CESTAT NEW DELHI , where the demand of service tax under Business Auxiliary Service stands confirmed and it is held that service tax will be chargeable on the commission received by the distributor (such as the appellant ) on the products purchased by his sales group. However, it has been held hat the service tax is not leviable on the commission earned by the distributor on the basis of the volume of the purchases made by the group of second level of distributors appointed by FSL on being sponsored by the distributor. The demand also has been restricted to the normal time limit Matter remanded to the Original Adjudicating Authority for restricting the demand strictly in terms of the observations and directions in this order - penalty set aside - appeal disposed off - matter on remand.

Summary

Issues:
1. Liability of service tax on commission earned by the appellant.
2. Applicability of normal time limit for demanding service tax.
3. Imposition of penalties on the appellant.

Analysis:
1. The appellant, engaged in multi-marketing under Right Concept Marketing (RCM), appealed against a service tax demand of &8377;1,82,585/- confirmed by the Commissioner (Appeals). The commission earned by the appellant from the principal company was alleged to be liable for service tax under Business Auxiliary Services. The appellant contended that the commission was not for promotion or marketing activities but as a dividend for introducing new distributors. Both sides agreed that the issue was covered by a Tribunal decision confirming service tax on the commission received by the distributor based on product purchases by the sales group. However, service tax was held not leviable on the commission earned based on the volume of purchases made by the distributor's second level of distributors. The demand was restricted to the normal time limit.

2. The appellant's representative acknowledged that previous Tribunal decisions had ruled against them on the merit of the issue. They cited a specific Final Order and argued that demands upheld were limited to the normal time limit. The Department's representative referred to a different Tribunal decision where the demand for the full period and penalties were upheld. The Tribunal noted that the decision cited by the Department did not consider the Supreme Court's judgment cited in the present case. Ultimately, the Tribunal set aside the impugned order and remanded the issue to the Original Adjudicating Authority to restrict the demand in line with the observations made in the order. The Tribunal also ruled that there was no justification for imposing any penalty on the appellant.

3. The Tribunal's decision emphasized the importance of doubt in the mind of the assessee regarding tax liability, citing a Supreme Court judgment to support the view that the longer limitation period could not be invoked when there was doubt on a particular issue. As a result, the Tribunal held that the demand should be restricted to the normal time limit of one year from the relevant date. The Tribunal also considered the absence of citation and argument of the Supreme Court's judgment in a previous case, leading to the decision to set aside the impugned order and remand the issue for appropriate action.

This detailed analysis of the judgment highlights the issues of service tax liability on commission, the application of the normal time limit for demands, and the imposition of penalties, providing a comprehensive overview of the Tribunal's decision in this case.