2017 (1) TMI 378 - AT - Service Tax

Business Auxiliary Services - Commission earned - Held that - reliance placed in the decision of the case Surendra Singh Rathore 2013 (8) TMI 149 - CESTAT NEW DELHI - 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 that 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. Extended period of limitation - Held that - when there is scope for doubt in the mind of an assessee on a particular issue, the longer limitation period, under proviso to Section 11 A(1) cannot be invoked - demand has been restricted to the normal time limit. The issue is 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 allowed by way of remand.

Summary

Issues:
Service tax liability on commission earned under Business Auxiliary Services - Normal time limit for demand.

Analysis:
The appeal was filed against the order passed by the Commissioner (Appeals) regarding the service tax liability on the commission earned by the appellant under Business Auxiliary Services. The appellant was engaged in multi-marketing activities, specifically Right Concept Marketing (RCM) for various goods on behalf of a company. The Revenue contended that the commission earned was liable for service tax under Business Auxiliary Services. Show cause notices were issued, and service tax demands were confirmed against the appellant. The appellant challenged this order before the Commissioner (Appeals), which was upheld, leading to the present appeals.

During the hearing, the appellant admitted that previous Tribunal decisions had ruled against them on the merit of the issue. The appellant argued that while the demand was upheld in those decisions, it was restricted to the normal time limit. The Revenue, on the other hand, cited a previous Tribunal decision that upheld the demand for the full period of limitation, including penalties. Both sides agreed that the issue was covered by the Tribunal's decisions, confirming the service tax on the commission received by the distributor. However, it was clarified that service tax was not leviable on the commission earned based on the volume of purchases made by the second level of distributors.

The Tribunal referred to previous decisions and held that the demand should be restricted to the normal time limit, citing the Apex Court's judgment regarding doubt on taxability issues. The Tribunal also noted that in a specific case mentioned by the Revenue, the benefit of limitation had not been extended, indicating a lack of citation and argumentation on relevant legal precedents. Consequently, the impugned order was set aside, and the issue was remanded to the Original Adjudicating Authority for a strict restriction of the demand as per the Tribunal's observations. Additionally, the Tribunal ruled that there was no justification for imposing any penalty on the appellant, ultimately allowing the appeals by way of remand.