2017 (5) TMI 820 - AT - Service Tax

Business Auxiliary Services - activity of providing Multi Level Marketing to its principal - extended period of limitation - penalty - Held that - the activity of Multi Level Marketing whether liable to levy of service tax was contentious issue which was resolved by the Tribunal in the case of Charanjeet Singh Khanuja 2015 (6) TMI 585 - CESTAT NEW DELHI holding that such activity should fall under the Business Auxiliary Service - there was ambiguity in interpretation of the statutory definition of Business Auxiliary Service thus the demand for extended period of limitation cannot be sustained - considering the fact that the appellant has not involved in the fraudulent activities concerning suppression fraud etc the penalty imposed u/s 78 ibid can be set aside invoking Section 80 in the interest of justice. Matter remanded back to the original authority for quantification of service tax liability payable by the appellant within the normal period of limitation - the amount of 7, 79, 616/- paid by the appellant has been considered in the adjudication order but the said amount has not been appropriated the original authority should give adjustment of the amount so deposited if found reasonable - appeal allowed by way of remand.

Summary

Issues:
Confirmation of service tax liability on multi level marketing activity under 'Business Auxiliary Services' for the period 2004-05 to 2008-09, ambiguity regarding levy of service tax, applicability of penalty under Section 78 of the Finance Act, 1994, consideration of already paid service tax amount, appropriateness of demand for extended period of limitation, remand for quantification of service tax liability.

Analysis:
The appeal challenged the confirmation of service tax liability on the appellant's multi level marketing activity under the taxable category of 'Business Auxiliary Services' for the period 2004-05 to 2008-09. The appellant's advocate acknowledged that the services provided fell under the said taxable category. However, he argued that the demand should be limited to the normal period of limitation due to the ambiguity regarding the levy of service tax on multi level marketing, which was clarified by a previous Tribunal decision. The advocate contended that since there was no intent to evade payment, penalty under Section 78 of the Finance Act, 1994 should not be imposed. Additionally, he highlighted that a certain amount of service tax had already been paid by the appellant, which had not been considered or adjusted against the confirmed demand.

The Tribunal noted that the issue of whether multi level marketing was liable for service tax was contentious and had been resolved in a previous case, establishing it as falling under 'Business Auxiliary Service.' Due to the ambiguity in interpreting the statutory definition, the demand for an extended period was deemed unsustainable. The Tribunal found no grounds for fraud or misstatement by the appellant to defraud government revenue. While upholding the liability for service tax under the normal period of limitation, the penalty under Section 78 was set aside as the appellant was not involved in fraudulent activities.

The Tribunal remanded the matter to the original authority for quantification of the service tax liability within the normal period of limitation. It directed the authority to verify the already paid amount and adjust it if pertaining to the normal period. The appeal was disposed of with these directions, emphasizing the consideration of the already paid service tax amount in the quantification process.