2018 (11) TMI 1517 - AT - Service Tax

Business promotion service/Business Support Services - amount collected as Field Care Plan Incentive Deposit (FCP deposit) - fallacious act - Held that - The fallacious act to be discarded at the first reading itself - The unemployed persons approach the appellant to undertake sales of insurance policies and for which they make certain deposits with the appellant, which are later refunded to the appellant on successful enrolment of further 25 Sales Officers for the said job. There are no justification on the part of the department in alleging that the appellant had promoted the business of the Sales Officers, on the contrary, the appellant provided employment to the Sales Officers in selling the insurance policies for which they obtained necessary agency certificates from the respective insurance companies. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the Field Care Plan Incentive Deposit (FCP deposit) collected is subjected to service tax under the category of 'business promotion service'?

Analysis:
1. Background and Facts: The appellant, engaged in providing taxable services, collected FCP deposits from sales officers for a marketing plan. The appellant paid service tax on registration and membership fees but not on the FCP deposit. A show cause notice was issued for recovery of service tax amounting to ?1,58,06,132 for the period January 2008 to March 2013, with interest and penalty.

2. Appellant's Submission: The appellant argued that the FCP deposit was wrongly categorized as a business support service. They contended that the sales officers were not conducting individual businesses of selling insurance policies and business cards. The sales officers were appointed as members/agents of the company for selling life care cards, and they were not qualified insurance agents under the Insurance Act, 1938.

3. Revenue's Contention: The Revenue argued that the FCP deposit was collected while providing appointments to sales officers for enrolling further sales officers. They claimed that the appellant provided necessary support to the business of the recruited sales officers, justifying the service tax on the FCP deposit.

4. Tribunal's Decision: The Tribunal analyzed the definition of 'Support of Business or Commerce Service' under the Finance Act, 1994. They found no merit in the Revenue's argument and disagreed with the allegation that the appellant promoted the business of the sales officers. The Tribunal observed that the appellant provided employment to the sales officers for selling insurance policies, and the FCP deposits were refunded to the sales officers even if they failed to bring further recruits. Consequently, the impugned order was set aside, and the appeal was allowed.

5. Conclusion: The Tribunal's decision clarified that the FCP deposit collected by the appellant was not subject to service tax under the category of 'business promotion service.' The judgment emphasized the distinction between providing employment to sales officers and promoting their individual businesses.