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2024 (8) TMI 1520 - AT - Service TaxValuation of taxable service - service tax to be charged on the gross commission due to the appellants as reflected in the certificates issued by the bank or on the net amount received by the appellant from the bank - extended period of limitation. Demand of service tax in respect of the commission received by the appellant for getting loan sanctioned from various banks - HELD THAT - This issue was considered by the Division Bench of this Tribunal under similar facts in the case of COMMISSIONER OF SERVICE TAX MUMBAI VERSUS JMD MARKETING (P) LTD. 2013 (10) TMI 1446 - CESTAT MUMBAI wherein the Tribunal has held that Service Tax should be paid on the gross amount charged by the service provider. Further on seeing the provision of Section 67 of the Act which provides that in case where the provision of service is for a consideration in money the service tax chargeable on any taxable service with reference to its value shall be the gross amount charged by the service provider for such service provided or to be provided by him; therefore considering the provision of Section 67 of the Finance act and the decision of the Tribunal in the case of JMD Marketing (P) Ltd and M/S EM PEE MOTORS LTD VERSUS CCE CHANDGIARH 2011 (8) TMI 415 - CESTAT NEW DELHI it is held that the appellant is liable to pay service tax on the gross commission rather than the net commission received by them hence this issue is decided against the appellant. Extended period of limitation - HELD THAT - The Department has been able to establish that the appellant has suppressed the material facts with intention to evade the payment of service tax because the appellant was under bonafide belief that they are liable to pay service tax on the net amount of commission received from the bank and they have been paying the service tax accordingly and have been filing service tax returns. Further it is found that the Division Bench of the Delhi Tribunal in the case of SHYAM SPECTRA PRIVATE LIMITED (FORMERLY CITYCOM NETWORK PRIVATE LIMITED) VERSUS COMMISSIONER OF SERVICE TAX DELHI II 2024 (8) TMI 95 - CESTAT NEW DELHI has examined the issue of limitation in detail and after considering the various decisions of the High Court and the Supreme Court has come to the conclusion that if the ingredients of Section 73(1) are not established then the extended period of limitation cannot be invoked. Conclusion - i) Appellant is liable to pay service tax on the gross commission rather than the net commission received by them hence this issue is decided against the appellant. ii) The demand is entirely barred by limitation because the show cause notice has invoked the extended period of limitation. The impugned order is set aside and the appeal is allowed only on limitation.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Service Tax on Gross vs. Net Commission Relevant legal framework and precedents: The determination of the value for service tax purposes is governed by Section 67 of the Finance Act, 1994, which states that the service tax is chargeable on the gross amount charged by the service provider. The Tribunal referenced past decisions, including Commissioner of Service Tax v. JMD Marketing (P) Ltd. and Em Pee Motors Ltd. v. CCE Chandigarh, which established that service tax should be paid on the gross commission. Court's interpretation and reasoning: The Court emphasized that the gross amount charged, as per Section 67, includes all payments made by the bank to the appellant, including those made directly to customers. The Tribunal noted that the appellant's practice of paying service tax on the net commission was inconsistent with the statutory requirement. Key evidence and findings: The certificates issued by the bank showed the gross commission payable to the appellant. The appellant, however, paid service tax only on the net amount received after deductions. Application of law to facts: The Tribunal applied Section 67 and determined that the appellant was liable for service tax on the gross commission, not the net amount. The deductions made by the bank did not alter the nature of the gross commission as the taxable value. Treatment of competing arguments: The appellant argued that service tax should be paid on the net commission, citing Rule 6 of the Service Tax Rules, 1994, and various precedents. However, the Tribunal found these arguments unpersuasive given the clear language of Section 67. Conclusions: The Tribunal concluded that the appellant must pay service tax on the gross commission, aligning with the statutory provisions and precedents. 2. Invocation of Extended Period of Limitation Relevant legal framework and precedents: The extended period of limitation under Section 73 of the Finance Act is applicable in cases of fraud, collusion, willful misstatement, suppression of facts, or contravention of the provisions with intent to evade tax. Court's interpretation and reasoning: The Tribunal examined whether the appellant's actions constituted willful suppression of facts. It referenced the Supreme Court's interpretation that suppression must be deliberate and with intent to evade tax. Key evidence and findings: The Department argued that the appellant suppressed material facts, as the service tax was paid on a net basis despite the gross commission being evident. However, the Tribunal found that the appellant operated under a bona fide belief and regularly filed service tax returns. Application of law to facts: The Tribunal applied the principles from cases like Pushpam Pharmaceuticals Co. and Anand Nishikawa Co. Ltd., which require suppression to be willful and with intent to evade tax. The Tribunal found no such intent in the appellant's actions. Treatment of competing arguments: The Department's reliance on the extended period was challenged by the appellant, who cited the lack of deliberate intent to evade tax. The Tribunal agreed with the appellant, noting the absence of evidence for willful suppression. Conclusions: The Tribunal concluded that the extended period of limitation was not applicable, as the criteria for its invocation were not met. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Tribunal reiterated, "The amount paid by the bank for the services rendered by the appellant and reflected as receipts in the books of accounts of the appellant, should be subjected to service tax." Core principles established: The judgment reinforced the principle that service tax is chargeable on the gross amount of consideration for services provided, as per Section 67 of the Finance Act, 1994. It also clarified that the extended period of limitation requires evidence of willful suppression or intent to evade tax. Final determinations on each issue: The Tribunal upheld the demand for service tax on the gross commission but set aside the demand on the basis of limitation, as the extended period was not justifiably invoked.
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