2021 (10) TMI 702 - AT - Service Tax

Levy of service tax - service to financial institutions in relation to selling of their loan products to their customers - taxability of commission as received by the appellant in terms of sub section 19 of 65 of Finance Act or not - imposition and quantum of penalty - HELD THAT - The services being rendered by the appellant are defined under section 65(19) of Finance Act, 1994. When the provision is read with section 68 thereof, it becomes clear that service was taxable and the appellant was liable to pay the service tax. There has been a major change in Finance Act with effect from 01.07.2012 by virtue of negative list under section 66B of the Act was provided. It was held that the services which are not covered under the said list are taxable. Apparently, the services of DSA to Financial institute is not mentioned in the said negative list nor any exemption for the same is brought to the notice. The appellant did not get himself registered immediately after 01.07.2012. He applied and got registration only in August, 2016 when the services were under scrutiny by Income Tax department. It is abundantly clear that the appellant was providing taxable service which is chargeable to service tax in terms of section 66B of the Finance Act, 1994. The appellant cannot be allowed to plead ignorance of law. Otherwise also the said liability has not been contested by the appellant as the entire demand stand already deposited that too without protest. Levy of penalty - HELD THAT - Irrespective of the fact that the appellant has paid the amount demanded along with the interest within 30 days of the issuance of show cause notice but same does not absolve him from imposition of penalty. 15% of the penalty has still to be paid by the appellant in terms of proviso to Section 78 of the Service Tax Act, 1944 - No doubt the said amount also stands already paid. in terms of proviso to section 78 of the Finance Act, proceedings against the appellant be deemed to be concluded - penalty is directed to remain confined to 15% of the total demand instead of it being @ 100% of the amount of demand. Appeal allowed in part.

Summary

Issues:
Taxability of commission received by appellant for providing services to financial institutions, registration under Service Tax regime, imposition of penalty.

Analysis:
1. Taxability of Commission:
The appellant worked as a Direct Selling Agent (DSA) for various financial institutions, providing taxable services related to selling loan products and receiving commission. The Department investigated based on data from the Income Tax Department and deemed the received commission taxable under sub-section 19 of section 65 of the Finance Act. A recovery of ?16,97,595 for the period from 01.04.2013 to 31.03.2017 was proposed, leading to the appeal before the Tribunal.

2. Registration under Service Tax Regime:
The appellant claimed unawareness of the Service Tax liability initially and mentioned confusion regarding the nature of services until 01.07.2012. The appellant got registered under the Service Tax regime only in August 2016 upon being informed by the Department. The appellant deposited the entire demanded amount, interest, and penalty within 30 days of the show cause notice issuance. However, the Department argued that the appellant's delayed registration indicated willful abstention from tax liability.

3. Imposition of Penalty:
While the appellant paid the demanded amount and interest promptly, the imposition of a penalty was contested. The Department justified the penalty, citing the appellant's delayed registration despite providing taxable services even before 2010. The penalty was imposed at 100% of the demand, which was confirmed in the order under challenge. However, considering the appellant's admission of liability and the provisions of Section 78 of the Finance Act, the penalty was modified to 15% of the total demand instead of 100%.

In conclusion, the Tribunal observed that the appellant provided taxable services chargeable under the Finance Act and could not claim ignorance of the law. The appellant's payment of the demanded amount without protest did not absolve them from penalty. The order under challenge was partly allowed, confirming the demand but reducing the penalty to 15% of the total amount.