2017 (9) TMI 1497 - AT - Service Tax

Business Auxiliary Services - commission agent service - demand for the period 1.7.2003 to 8.7.2004 - Held that - When the activity of the appellant is to identify the customer through their web portal and receive the sale proceeds on behalf of the merchant and pay the same to the merchant, it does have same bearing to the definition of commission agent. The appellant cannot be found fault with if they believed bonafidely that they would fall within the definition - the demand for the period 1.7.2003 to 8.7.2004 is unjustified and requires to be set aside - demand for the later period upheld. Penalty u/s 78 - Held that - appellant has made payment of service tax along with interest even before issuance of SCN as well as of the fact that the issue was an interpretational one and during the relevant period there was much confusion as to whether the said activity would fall within the Business Auxiliary Service or under internet advertisement services, which was introduced after 1.5.2006, the penalty imposed u/s 78 is unjustified. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Discharge of service tax liability for the period mentioned in the show cause notice.
2. Applicability of Notification No.13/2003 dated 20.6.2003 exempting commission agents from service tax.
3. Justification of penalty imposed under section 78 of the Finance Act, 1994.

Issue 1:
The appellant had discharged the service tax liability for the period from 9.7.2004 onwards as demanded in the show cause notice. However, the contention was raised regarding the demand for the period 1.7.2003 to 8.7.2004, arguing that it was hit by limitation due to the absence of allegations of suppression of facts to evade service tax payment. The appellant claimed coverage under Notification No.13/2003, which exempts commission agents from service tax liability. The appellant's role in receiving consideration based on the sale of goods through their web portal was compared to that of a commission agent. The Tribunal held that the demand for the period 1.7.2003 to 8.7.2004 was unjustified and set it aside.

Issue 2:
The appellant argued that the failure to discharge service tax was due to a genuine belief that the activity was non-taxable until it became taxable under internet advertisement services from 1.5.2006. The department contended that the activity fell within the definition of Business Auxiliary Service, justifying the demand raised. The appellant immediately paid the service tax along with interest upon realization of the confusion, even before the issuance of the show cause notice. The penalty imposed under section 78 was deemed unwarranted by the Tribunal, considering the confusion surrounding the taxability of the activity during the relevant period.

Issue 3:
The Revenue contended that the appellant did not qualify as a commission agent and provided services beyond the scope of a commission agent, such as collecting amounts on behalf of merchants and deducting commissions. The department discovered the non-payment of service tax through an investigation, alleging suppression of facts by the appellant. The Tribunal, however, found that the appellant's activities aligned with the definition of a commission agent as per Notification No.13/2003, and the demand for the specified period was unjustified. The penalty imposed under section 78 was set aside by the Tribunal, considering the interpretational confusion and the appellant's proactive payment of service tax.

In conclusion, the Tribunal modified the impugned order by setting aside the demand for the period 1.7.2003 to 8.7.2004 and also overturned the penalty imposed under section 78 of the Finance Act, providing consequential relief if applicable.