2017 (3) TMI 1220 - AT - Service Tax

Nature of Activity - provision of services or mere profit sharing arrangement - Activity of refilling the nitrogen has been sub contracted by the appellant to five contractors who are their sales agents - whether the activities of the appellant would fall within the ambit of business auxiliary service (BAS)? - Held that - the agents of the appellant are approached by the customers who had purchased the only on reference and goodwill of the appellant. Sharing of consideration is also on transaction basis. The amount received by the appellants, though called as profit sharing is only a consideration from the agents for promoting the business at agreed terms and is therefore very much a business auxiliary service and the appellants will then become liable to discharge, and tax as applicable thereon - appeal dismissed - decided against appellant.

Summary

Issues:
Interpretation of business auxiliary service (BAS) under Service Tax law; Condonation of delay in filing appeal; Time bar for issuing demand notices; Profit-sharing agreements as consideration for services rendered; Liability of appellant for service tax on commission received.

Interpretation of BAS under Service Tax Law:
The case involved the appellant, registered under Service Tax, providing maintenance & repair services. During an audit, it was found that the appellant entered into agreements with service providers, receiving commission from suppliers, leading to a demand notice for service tax, interest, and penalties. The Tribunal analyzed whether the activities of the appellant fell within the ambit of business auxiliary service (BAS). It was established that the appellant, a manufacturer providing after-sales service, subcontracted nitrogen refilling to sales agents. Despite the appellant's claim of profit-sharing agreements without service provision, it was determined that the agents were approached by customers based on the appellant's goodwill, making the consideration received a form of business auxiliary service. The Tribunal upheld the liability of the appellant for service tax under BAS, dismissing the appeal.

Condonation of Delay in Filing Appeal:
The appellant sought condonation of a 17-day delay in filing the appeal, attributing it to personal reasons like his daughter's marriage and family illness. The Tribunal, considering the circumstances and the short delay, condoned the delay and proceeded with the appeal for final disposal with the consent of both parties.

Time Bar for Issuing Demand Notices:
The appellant contended that the demand notice for the period 2006-07 to 2010-11 was time-barred, as the audit was conducted in February 2008, and documents were obtained then. Arguing that the demand beyond one year was not sustainable, the appellant raised the issue of time limitation. However, the Tribunal did not find merit in this argument, as the demand notice was issued within the statutory period, leading to the dismissal of this contention.

Profit-Sharing Agreements as Consideration for Services Rendered:
The appellant defended that the agreements with service providers were profit-sharing arrangements without service provision, disputing the promotion of business for five firms. The appellant claimed that the consideration received was merely profit-sharing and not for services rendered. However, the Tribunal concluded that the consideration received was for promoting business at agreed terms, constituting a business auxiliary service, making the appellant liable for service tax on the commission received.

Liability of Appellant for Service Tax on Commission Received:
Ultimately, the Tribunal dismissed the appeal, upholding the original order that found the appellant liable for service tax on the commission received. It noted the balanced analysis by the Commissioner (Appeals) and the well-reasoned findings on the appellant's liability. The Tribunal found no infirmity in the impugned order, leading to the dismissal of the appeal.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD highlights the key issues, arguments presented, and the Tribunal's findings regarding the liability of the appellant for service tax on commission received under business auxiliary service.