2023 (8) TMI 996 - AT - Service Tax

Classification of services - Business Auxiliary Service or Business Support services - consideration received from the companies, accounted as commission in the books of accounts - HELD THAT - On going through both the agreement and offer letter, it is found that none of them specify the nature of services to be in relation to administrative services like maintenance of payroll of the employees, maintenance of attendance data, managing office supply needs, planning meeting, scheduling appointments etc. This being so, the arguments of the appellant cannot be appreciated that the services was in the nature of Business Support Service . Moreover, there is no mention of charges paid for the said Business Support Services claimed to have been rendered by the appellants. The consideration is only in the form of a fixed percentage of the total transaction that the principals had with their clients. Therefore, notwithstanding, the averments of the appellants and the affidavits filed by the Counsel on behalf of the appellants, it is not convinced that the appellants have rendered Business Support Services . Thus, an agreement, oral or written, is the source to understand the type of service rendered. In the instant case, it is understood from the contracts or the offer letter that the appellants rendered services with reference to the main work of their principals i.e. provision of support for logistics - there are nothing in the records or in the arguments proposed by the appellants to set aside the impugned order - the impugned order does not necessitate any interference - appeal dismissed.

Summary

Issues involved:
The issues involved in this legal judgment are the classification of services provided by the appellants, the applicability of Service tax on the commission received, and the interpretation of agreements with the companies.

Classification of services provided by the appellants:
The appellants contended that the services rendered were administrative in nature, such as payroll maintenance, attendance data management, and office supply needs. They argued that these services should be classified as "Business Support Service" rather than "Business Auxiliary Service." The appellants emphasized that the nomenclature used in accounting should not solely determine the type of service provided. They also claimed eligibility for benefits as sub-service providers under specific circulars.

Applicability of Service tax on commission received:
The Revenue asserted that the commission received by the appellants was for services rendered on behalf of their clients and should be classified as "Business Auxiliary Service." They highlighted that the commission was based on the revenue earned by the companies from their customers, making the appellants act as commission agents. The Revenue further referenced circulars and judgments to support their classification of the services provided.

Interpretation of agreements with the companies:
The agreements with M/s Tiger Logistics and M/s Color Barcode were examined to determine the nature of services provided by the appellants. The agreements did not explicitly specify administrative services like payroll maintenance or office supply management. The consideration received was based on a fixed percentage of the total transaction between the companies and their clients. The Tribunal found that the agreements indicated services related to logistics support rather than administrative support, leading to the dismissal of the appeal.

Separate Judgment:
The appeal was dismissed by the Tribunal, with the pronouncement made on 21/08/2023.