2019 (2) TMI 672 - AT - Service Tax

Business Auxiliary service - commission received - appellant had received commission from the union on which the income tax was deducted at source for which even a TDS certificate in Form-16A was issued - Held that - The substance or the true relationship between the milk union and the appellant is what is to be looked into and not the way it appears. Reliance placed in the judgement of Hon ble Supreme Court in the case of The Bhopal Sugar Industries Ltd. Vs. Sales Tax Officer, Bhopal 1977 (4) TMI 151 - SUPREME COURT OF INDIA , wherein, the Hon ble Supreme Court while interpreting the terms of the agreement therein has held that what is to be looked into is the substance and not the form of it. The matter is remanded back to the file of the adjudicating authority, who shall pass a denovo order in accordance with law - appeal allowed by way of remand.

Summary

Issues Involved:
Service tax liability on commission received by a cooperative society acting as an agent for a milk producers union.

Detailed Analysis:

Issue 1: Service Tax on Commission Received
The appellant, a cooperative society registered under the Tamilnadu Co-operative Society Act, 1983, received commission from the District Milk Producers Co-operative Union for services provided. The Revenue contended that the commission received falls under "Business Auxiliary Service" and is subject to service tax. The Commissioner confirmed the demand for service tax, stating that the society acted as an agent of the union, and the relationship between them was that of principal to agent.

Analysis: The key contention revolved around whether the commission received by the society was liable for service tax under the category of Business Auxiliary Service. The Commissioner's decision was based on the interpretation of the relationship between the society and the union as that of principal to agent, leading to the demand for service tax.

Issue 2: Interpretation of Invoices and Balance Sheets
The invoices raised by the union on the society indicated the word 'Agency,' and tax was deducted at the source, resembling a typical characteristic of commission. The balance sheets presented by the appellant were crucial evidence not considered by the lower authority. The Tribunal emphasized the importance of the balance sheets, which were not filed before the lower authority, leading to a remand of the matter for fresh adjudication.

Analysis: The Tribunal focused on the documentary evidence, particularly the invoices and balance sheets, to determine the nature of the transactions between the society and the union. The absence of consideration for the balance sheets by the lower authority led to a remand for a fresh adjudication taking into account these vital documents.

Issue 3: Legal Precedent and Substance over Form
The Tribunal referred to a Supreme Court decision emphasizing that the true relationship between the parties must be considered over formal descriptions like 'agent' or 'buyer.' The essence of agency to sell lies in the delivery of goods as the property of the principal. The Tribunal directed the adjudicating authority to apply this legal precedent in determining the nature of the relationship between the milk union and the appellant society.

Analysis: By citing the legal precedent, the Tribunal highlighted the importance of analyzing the substance of the relationship between the parties rather than relying solely on formal designations. This directive aimed to guide the adjudicating authority in assessing the true nature of the transactions between the milk union and the society.

In conclusion, the Tribunal set aside the impugned order and remanded the matter for fresh adjudication, emphasizing the consideration of balance sheets, legal precedent, and the true substance of the relationship between the parties. The appeal was treated as allowed by way of remand, leaving all contentions open for further review.