2023 (6) TMI 306 - AT - Service Tax

Levy of Service Tax - Business Auxiliary Service - appellant is individual or a commercial concern? - whether the appellants who rendered Business Auxiliary Services as a proprietor can be treated to be a commercial concern before 01.06.2005 also? - extended period of limitation - penalties - HELD THAT - Tribunal in the case of MR. CHARANJEET SINGH KHANUJA AND OTHERS VERSUS CST, INDORE/LUCKNOW/JAIPUR/LUDHIANA AND OTHERS 2015 (6) TMI 585 - CESTAT NEW DELHI has held that When an individual engages himself in a commercial activity, he has to be treated as business or commercial concern. Therefore, notwithstanding the fact that w.e.f. 1-5-2006 the term, 'commercial concern' in Section 65(105)(zzb) was replaced by any person', we are of the view that even during the period prior to 1-5-2006, the Business Auxiliary Service, even if provided by an Individual to a client, was taxable. Thus, commercial concern covers individuals also when they are into a business and to this extent,t the appellant s arguments are not acceptable. The appellants are liable to pay service tax on the services rendered by them to M/s Forever Living Products Pvt. Ltd. before and after 01.06.2005. Extended period of limitation - HELD THAT - In the facts and circumstances of the case that the appellants have not obtained any registration and have not paid the applicable service tax. The appellants have not disclosed the material facts of providing taxable service under the category of Business Auxiliary Service to M/s Forever Living Products Pvt. Ltd. on their own and the Department came to know about the activity only after conducting certain inquiries. Therefore, there is suppression of material fact on the part of the appellants. Therefore, extended period is rightly invokable. Imposition of penalties under Section 76 and Section 78 - HELD THAT - Hon ble High Court of Punjab Haryana in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. PANNU PROPERTY DEALERS, LUDHIANA 2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT observed that simultaneous penalty cannot be imposed under Section 76 and Section 78 - Moreover, in the instant case, the appellants have paid the duty along with interest and 25% of value as penalty on 06.05.2010 and looking into the provisions of Section 80 of the Finance Act, the penalties imposed can be waived in the facts and circumstances of the case. Appeal allowed in part.

Summary

Issues Involved:

1. Classification of services under "Business Auxiliary Service" and liability of individuals to pay Service Tax.
2. Invocation of extended period for demand.
3. Imposition of simultaneous penalties under Section 76 and Section 78 of the Finance Act, 1994.

Summary:

Issue 1: Classification of Services and Liability of Individuals:

The appellants, recognized as distributors by M/s Forever Living Products (India) Private Limited, were engaged in selling health/beauty care products on a commission basis. The Department classified the services rendered by the appellant as "Business Auxiliary Service" under Section 65(19) of the Finance Act, 1994, and issued a show cause notice demanding Service Tax. The appellant contended that individuals were not liable to pay Service Tax under "Business Auxiliary Service" prior to 18.04.2006, citing changes in the definition of taxable service. The Tribunal, referencing cases such as Charanjeet Singh Khanuja VS CST and R.S. Financial Services, concluded that individuals engaged in commercial activities are considered commercial concerns and are liable to pay Service Tax even before 01.06.2005.

Issue 2: Invocation of Extended Period:

The appellant argued against the invocation of the extended period, claiming no wilful suppression of facts or intent to evade tax. The Tribunal, however, found that the appellants had not obtained registration or paid the applicable Service Tax, and the Department discovered the taxable activity only after conducting inquiries. Citing the case of Dharmpal Satyapal Vs CCE, the Tribunal held that there was suppression of material facts, justifying the invocation of the extended period.

Issue 3: Imposition of Simultaneous Penalties:

The appellant challenged the imposition of penalties under both Section 76 and Section 78. The Tribunal, referencing the Hon'ble Punjab & Haryana High Court's decision in Pannu Property Dealers, agreed that simultaneous penalties under Section 76 and Section 78 cannot be imposed. Additionally, considering the appellant had paid the duty along with interest and 25% of the penalty, the Tribunal invoked Section 80 of the Finance Act to waive the remaining penalties.

Conclusion:

The appeal was partially allowed with the following terms:
(i) Service Tax of Rs. 3,67,987/- confirmed along with interest.
(ii) Penalty under Section 78 restricted to Rs. 92,060/- as paid by the appellants.
(iii) Balance of the penalty under Section 78 and other penalties under Sections 76 and 77 set aside.

(Pronounced on 06/06/2023)