2018 (7) TMI 862 - AT - Service Tax

Levy of service tax - Agency Commission - Brokerage Commission for booking of space in the airline - Sub-contract - whether the Agency Commission received from M/s. UPS Jet Air Express Pvt. Ltd. is chargeable to service tax? - Held that - The department has not disputed the fact that M/s. UPS Jet Air Express Pvt. Ltd. are paying them commission from the amount collected from their customers, which includes the bill raised by the appellants on M/s. UPS Jet Air Express Pvt. Ltd. after paying the service tax due on it, so the Commission received by the appellants has already suffered the service tax - Subcontractors are liable to pay service tax whether or not the services are provided by a person in his capacity as a subcontractor and whether or not such services are used as input services - the appellants are not required to pay service tax on the Agency Commission received by them from M/s. UPS Jet Air Express Pvt. Ltd. - demand set aside. Business Auxiliary Service - Whether the Brokerage Commission received by them from the airlines for booking of space, is liable to service tax under the head BAS? - Held that - Appellant are not engaged in providing any marketing or promoting services for the airlines or shipping lines - reliance placed in the case of DHL Logistics Pvt. Ltd. vs. CCE 2017 (8) TMI 600 - CESTAT MUMBAI , where it was held that Any commission/incentive received, as a result of this transaction of sale cannot be considered as supply of BAS - demand set aside. Penalties - Held that - As the main demand itself is not sustainable, the penalties are also required to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of 'Agency Commission' and 'Brokerage Commission' received by the appellants.
2. Applicability of service tax on the services provided by the appellants as subcontractors.
3. Imposition of penalties under Section 76 and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Taxability of 'Agency Commission' and 'Brokerage Commission'

The Department issued a show-cause notice demanding service tax on 'Agency Commission' and 'Brokerage Commission' received by the appellants. The Commissioner confirmed demands on the 'Agency Commission' and 'Brokerage Commission' received by the appellants, imposing penalties under Section 76 and 78 of the Finance Act, 1994. The appellants contended that they acted as subcontractors and that the 'Agency Commission' had already suffered service tax. The Tribunal found that the appellants were not required to pay service tax on the 'Agency Commission' received from M/s. UPS Jet Air Express Pvt. Ltd. as it had already been taxed. Regarding the 'Brokerage Commission,' the Tribunal referred to precedents and held that the commission received by the appellants for buying and selling space from airlines did not fall under 'Business Auxiliary Service' and hence was not taxable.

Issue 2: Applicability of service tax on services provided as subcontractors

The appellants argued that they acted as subcontractors and were not liable for service tax as the main contractor should pay as per Trade Notice No.5/97. The Department contended that subcontractors are also taxable service providers. The Tribunal found that the Trade Notice conditions applied only if both the main contractor and subcontractor were registered as 'Custom House Agents.' As M/s. UPS Jet Air Express Pvt. Ltd. was registered as a 'Courier Service,' the exemption claimed by the appellants was not eligible. However, since the commission received by the appellants had already suffered service tax, they were not liable for service tax.

Issue 3: Imposition of penalties

The appellants argued that there was no suppression of facts and that penalties should not be imposed due to reasonable cause for non-payment of service tax. The Tribunal found that the main demand itself was not sustainable, leading to the setting aside of penalties. The Tribunal referred to relevant judgments to support the appellants' arguments regarding penalties.

In conclusion, the Tribunal set aside the demands confirmed in the impugned order and penalties, allowing the appeal with consequential relief, if any.

This detailed analysis covers the taxability of 'Agency Commission' and 'Brokerage Commission,' the applicability of service tax on services provided as subcontractors, and the imposition of penalties under Section 76 and 78 of the Finance Act, 1994 in the judgment delivered by the Appellate Tribunal CESTAT BANGALORE.