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2018 (6) TMI 665 - AT - Service TaxBusiness Auxiliary Service - Commission agency service or not? - appellant is engaged as a contractor on behalf of the Government Departments to collect sales tax, royalty and toll tax - Revenue was of the view that in cases where the actual collection was more than the amount paid to the authorities, the difference is in the form of the commission received by the appellant. Considering the appellant to be a Commission Agent , Revenue was of the view that Service Tax is liable to be paid on such commission under the category of Business Auxiliary Service. Held that - Service Tax under the category of Business Auxiliary Service would become liable only if the service is rendered in relation to the business of the recipient - In the present case, the appellant, as a contractor, has engaged in collecting statutory levies on behalf of the Government department (CTD)/ statutory authority (NHAI) neither of whom are engaged in business - the levy of Service Tax cannot be sustained on the Commission retained by the appellant. Activity of toll collection - Held that - It is also fairly well settled that no Service Tax can be levied on such an activity as held by the Tribunal in the case of Commissioner v/s Intertoll ICS 2011 (5) TMI 257 - CESTAT, NEW DELHI , where it was held that N/N. 13/2004 specifically exempts the service tax liability on such services of collection of duties and taxes levied by Government - demand set aside. Collection of commercial taxes for CTD - Held that - The appellant will also be entitled to the benefit to exemption under N/N. 13/2004-ST dated 10/09/2004 which specifically exempts the services provided by any person to the Government of State in relation to collection of any duties or taxes levied by the Government from the whole of the Service Tax leviable thereon - demand set aside. Appeal allowed - decided in favor of appellant.
Issues:
1. Whether the appellant is liable to pay Service Tax under Business Auxiliary Service (BAS) for the commission received from toll/royalty/commercial tax collections. 2. Whether the appellant falls within the definition of a 'Commission Agent' as per Section 65(19) of the Finance Act, 1994. 3. Whether the appellant is entitled to the exemption under Notification No. 13/2004-ST dated 10/09/2004 for services provided to Government agencies. Analysis: Issue 1: Liability for Service Tax under BAS The appellant acted as a contractor for various government departments to collect statutory dues such as toll, royalty, and commercial tax. The Revenue contended that the appellant, as a 'Commission Agent,' is liable to pay Service Tax under BAS for the commission received. However, the Tribunal noted that for Service Tax to apply under BAS, the service activities must pertain to the business of the service recipient. In this case, the appellant collected taxes for government departments/statutory authorities not engaged in business. Therefore, the Tribunal held that the levy of Service Tax on the commission retained by the appellant was not sustainable. Issue 2: Definition of 'Commission Agent' The Revenue argued that the appellant falls under the definition of a 'Commission Agent' as per Section 65(19) of the Act. However, the Tribunal examined whether the recipient of the service is engaged in business or commerce to be covered by BAS. Citing a case precedent, the Tribunal emphasized that the service provided must be in relation to the business of the recipient for Service Tax liability. As the government departments were not engaged in business, the Tribunal concluded that the appellant did not fall under the 'Commission Agent' category for Service Tax purposes. Issue 3: Entitlement to Exemption Regarding the exemption under Notification No. 13/2004-ST, the appellant argued that the toll/royalty/commercial tax collections were on behalf of the government, thus qualifying for the exemption. The Tribunal agreed and held that the appellant would be entitled to the exemption under the notification, which exempts services provided to the Government of a State in relation to the collection of duties or taxes levied by the Government from Service Tax. In conclusion, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.
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