2012 (11) TMI 450 - AT - Service Tax

Business Auxiliary Service - denial of Notification No.13/2003-ST - service tax demand with interest thereon and penalties - Held that - Persuing the Management Agent agreement entered into by the appellant with the principal the appellant is required to display, stock and sell jewellery products to the customers through showrooms managed and operated by the agent on stock transfer basis with the design, maintenance and operation of the showrooms undertaken as per the directions of the principal and the insurance cover for the showroom has to be provided by the agent. There is also condition that the agent shall manage and operate or deal in the showroom only the products supplied by the principal company and shall not deal with any other products in the showroom except with the prior written consent of the principal. Even the bills raised for the sale of the products should be in the principal s name. In consideration for services rendered, the agent is entitled to receive a management fee based on the turn over achieved by him on a slab basis Thus from the tenor of the agreement, it is absolutely clear that the appellant is not a mere commission agent as envisaged in the Notification No.13/2003. The appellant is not merely acting as a Commission Agent but does something much more than that i.e., designing, managing and operating a showroom, receiving goods on stock on transfer basis, undertaking sales promotion activities and collecting the sale proceeds on behalf of the principal. These activities do not come within the purview of Commission agent as defined in the notification No.13/2003 - against assessee.

Summary

Issues:
1. Applicability of Notification No.13/2003 for exemption from service tax.
2. Legality of reviewing an order after withdrawal of appeal before Commissioner (Appeals).

Analysis:

Issue 1: Applicability of Notification No.13/2003 for exemption from service tax
The appellant, a service provider, entered into a Management Agent agreement with a principal company to operate a showroom and sell products. The appellant claimed exemption from service tax under Notification No.13/2003, contending that their activities fell under the definition of a Commission Agent as per the notification. The appellant argued that the services rendered were covered by the notification, entitling them to the exemption. The appellant relied on Tribunal decisions supporting their interpretation of the notification. However, the Commissioner held that the appellant's activities went beyond those of a Commission Agent as defined in the notification. The Commissioner emphasized that the appellant was responsible for showroom management, stock transfer, sales promotion, and collection of sale proceeds, which exceeded the scope of a Commission Agent. Consequently, the Commissioner concluded that the appellant was not eligible for the exemption under Notification No.13/2003.

Issue 2: Legality of reviewing an order after withdrawal of appeal before Commissioner (Appeals)
The appellant argued that once the appeal before the Commissioner (Appeals) was withdrawn, the order of the lower adjudicating authority became final, precluding further proceedings. The appellant cited a Tribunal judgment to support their position. However, the Commissioner initiated review proceedings after the withdrawal of the appeal, leading to the impugned order. The Commissioner defended the review action, stating that there was no legal restriction preventing a review after withdrawal of an appeal. The Commissioner maintained that such review actions were permissible within the prescribed time limits. The Tribunal concurred with the Commissioner's stance, affirming the legality of the review process in this case.

In conclusion, the Tribunal dismissed the appeal, upholding the Commissioner's decision that the appellant was not entitled to the benefit of Notification No.13/2003. The Tribunal also validated the Commissioner's review of the order following the withdrawal of the appeal before the Commissioner (Appeals).