2018 (8) TMI 623 - AT - Service Tax

Levy of Service Tax - activity of trading - whether the appellant is liable to pay service tax on their activity of trading, wherein they receive goods on sale basis from the manufacturer-Ingersoll-Rand India Ltd (IRIL) and such goods are resold by them on retail sale price as fixed by the manufacturer IRIL and they are entitled to a fixed amount of commission/discount/margin? Held that - There is no merit in the appeal of Revenue as the appellant assessee have purchased the goods from the principal and have resold such goods on payment of sales tax/VAT. It is not the case of Revenue that such sales tax have been paid erroneously or there was no sale purchase at all. Benefit of N/N. 8/2008-ST. - Held that - Appellant are entitled to the benefit of threshold exemption under the Notification No. 8/2008-ST. The matter is remanded to the Adjudicating Authority only for the limited purpose of verifying the threshold exemption with respect to the turnover - penalty is deleted - appeal allowed by way of remand.

Summary

Issues:
1. Liability to pay service tax on trading activity.
2. Liability for service tax on repair and maintenance services and Business Auxiliary Services.
3. Deletion of demand for commission/discount received by the assessee.
4. Entitlement to threshold exemption under Service Tax provisions.

Analysis:

1. The primary issue in this case was whether the appellant was liable to pay service tax on their trading activity. The appellant received goods on a sale basis from the manufacturer and resold them at fixed prices, earning a commission. The Revenue contended that the appellant's activity amounted to the promotion of sales and was thus liable for service tax. However, the Tribunal found that the appellant had purchased and resold the goods, paying VAT/sales tax, and held that there was no error in the Commissioner's order.

2. Another issue raised was the liability for service tax on repair and maintenance services and Business Auxiliary Services. The Revenue argued that the appellant's activity of earning discounts was akin to sales promotion and hence taxable. The appellant, on the other hand, maintained that they had purchased goods, transferred titles, and paid sales tax, thus not warranting service tax liability. The Tribunal sided with the appellant, dismissing the Revenue's appeal.

3. The Revenue appealed against the deletion of demand for commission/discount received by the assessee. The Revenue contended that the discounts were related to sales promotion and hence taxable. However, the Tribunal found that the appellant had purchased and resold goods, paying sales tax, and thus upheld the deletion of the demand.

4. Lastly, the issue of entitlement to threshold exemption under Service Tax provisions was considered. The appellant argued that their turnover was below the threshold limit for the relevant financial years, warranting exemption. The Tribunal agreed, allowing the appellant's appeal and remanding the matter to verify the threshold exemption. The penalties sustained in the impugned order were also deleted.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the appellant's appeal, holding that the appellant was entitled to the benefit of threshold exemption and not liable for service tax on the trading activity and discounts received.