2023 (8) TMI 407 - AT - Service Tax

Levy of Service Tax - Business Auxiliary services - services rendered by the appellant to the multi level marketing company - commission received in the multi-level marketing - commission received as proprietor of Vision Network - out of India commission - incentives and commission in respect of Omega Global - time limitation - non-specific SCN - HELD THAT - The Tribunal in the case of Kalpataru Power Transmission Ltd. 2022 (6) TMI 1042 - CESTAT AHMEDABAD held that In the present matter we find that department has not disputed the facts that the payment to overseas consultant/agents/service providers was made from the overseas projects site branch/office of the Appellant and said Foreign Service providers have charged local VAT/GST/Service tax as applicable in the respective foreign countries in invoices issued by them to foreign site/project office/Branch office of Appellant. The said facts clearly established that the services have been provided by the foreign agents to the foreign site office/branch office of Appellant and thus, the service cannot be said to be received in India when the same is provided outside India, used outside India and paid outside India. Therefore, demand of service tax in the impugned matter legally not correct on this ground also. The impugned order cannot be sustained as there is no specific allegation in the show-cause notice on the category of the Business Auxiliary Service - the impugned order is not sustainable on limitation - Even though the demand is restricted to normal period, the total value of taxable services is within the small-scale exemption - Either way, the impugned order is not sustainable - Appeal allowed.

Summary

Issues:
The issues involved in this case are whether the appellant's services rendered to a multi-level marketing company attract service tax, the specificity of the show-cause notice, the time-barred nature of the demand, and the taxability of various types of commissions and incentives received.

Service Tax on Appellant's Services:
The appellant was engaged in providing Marketing Service/Distributorship and promotion of health care products, which included canvassing for new agents/distributors. The Department contended that these services attract service tax. The Deputy Commissioner confirmed the service tax demand, which was partially upheld by the Commissioner (Appeals). The appellant challenged this decision.

Specificity of Show-Cause Notice:
The appellant argued that the show-cause notice was flawed as it did not specify the particular sub-clause under Section 65(19) of the Finance Act, 1994, under which the demand was raised. The appellant cited previous Tribunal cases where demands were set aside due to lack of specificity in the notice.

Time-Barred Nature of Demand:
The appellant contended that the demand for the years 2006-07 to 2010-11 was time-barred. The Department argued that the omissions by the appellants did not constitute suppression of facts with intent to evade tax. The appellant relied on various cases to support the argument that the extended period and equal penalty should not be invoked.

Taxability of Commissions and Incentives:
The appellant argued that certain amounts received, such as sharing of international profit and incentives, should not be taxed. While conceding that commissions earned in multi-level marketing are taxable, the appellant maintained that the demand should be limited to the year 2010-11 or fall within the exemption limit for Small-Scale Units.

Decision:
The Tribunal found that the show-cause notice lacked specificity regarding the category of 'Business Auxiliary Service' and was not sustainable on limitation grounds. The demand was restricted to the normal period, and the total value of taxable services fell within the small-scale exemption. Therefore, the impugned order was set aside, and the appeal was allowed.