2019 (6) TMI 1020 - AT - Service Tax

Business Auxiliary Service - amount received as commission towards sale of the goods - HELD THAT - There is no transaction of commission between the seller of the goods and the appellant. The appellant is financing the sale value on behalf of the buyer of the goods and making payments to the sellers of the goods. It is absolutely clear that the amount received by the appellant is not commission but only the charges towards financing the fund to the buyer. Therefore, the same does not qualify as commission particularly under Business Auxiliary Service. Hence, the demand confirmed under the head of Business Auxiliary Service is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of the nature of the amount received by the appellant from M/s. Jain Bright Steel Traders and its classification for service tax purposes.

Analysis:
The case revolved around the contention that the appellant was collecting a commission from M/s. Jain Bright Steel Traders, which was accounted for as 'Finance Account' under 'other income' for the financial years 2003-04 to October 2006. The Revenue argued that this amount constituted a commission received for the sale of goods by M/s. Jain Bright Steel Traders, falling under Business Auxiliary Service and thus subject to service tax. The demand was confirmed and upheld by the Commissioner (Appeals), leading to the present appeal.

The appellant's counsel contended that the amount received and accounted for as Finance Account was not a commission but an interest amount from the buyer of the goods to whom the bill amount was financed. Supporting documents such as invoices, ledgers of M/s. Jain Bright Steel Traders, and debit notes issued to buyers were presented to demonstrate that no commission was received from the seller of the goods. Instead, the charges were collected as interest for financing the sale value to the buyer.

Upon careful consideration of the submissions and facts, it was established that there was no transaction of commission between the seller of the goods and the appellant. The appellant was found to be financing the sale value on behalf of the buyer and making payments to the sellers, subsequently recovering the financed amount along with interest. The interest received was accounted for as 'finance amount' under 'other income.' Therefore, it was concluded that the amount received was not a commission but charges for financing the fund to the buyer, not qualifying as commission under Business Auxiliary Service. Consequently, the demand confirmed under the said service category was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal.