2014 (5) TMI 689 - AT - Service Tax

Del Credre Agent - Market Research Agency - Lower appellate authority concluded that the services rendered by a Del Credre Agent does not merit classification as a Market Research Agency - Held that - From the agreement entered into by the respondent with RIL, it is clear that the respondent has been appointed as Del Credere Agent and has undertaken the functions of a Del Credere Agent for which the commission has been paid. No doubt, the agreement includes a clause that at the request of the Principal, they shall also undertake market survey. However, from the facts recorded by the lower appellate authority, it is clear that the respondent has not undertaken any such activity even though the agreement provided for the same. Even otherwise, when a number of services are rendered, for the purpose of classification, the principal service which gives the essential character to the service has to be seen. From the documentary evidence available on record, it is seen that the essential character of the service is that of a Del Credere Agent which is classifiable under Business Auxiliary Service. Following decision of CST, Bangalore v. N.K. Agencies Pvt. Ltd. reported in 2010 (7) TMI 192 - KARNATAKA HIGH COURT - Decided against Revenue.

Summary

Issues:
Classification of services rendered by respondent as Market Research Agency for Service Tax liability.
Classification of services rendered by respondent as Del Credre Agent under Business Auxiliary Service.

Analysis:
1. The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune. The respondent, M/s. Kesar Petro Products Ltd., was appointed as Del Credre Agents by M/s. Reliance Industries Ltd. to organize, promote, and effect the sale of Linear Alkyl Benzene (LAB). The department contended that the respondent's activity of market survey was exigible to Service Tax under Market Research Agency's services. A notice was issued demanding Service Tax, which was adjudicated upon, confirming the demands. The lower appellate authority concluded that the services rendered by a Del Credre Agent did not merit classification as a Market Research Agency, setting aside the demand. The Revenue appealed against this decision.

2. The Revenue argued that the agreement between the respondent and RIL included a provision for conducting market reports or surveys, indicating that the respondent rendered services of a Market Research Agency liable to Service Tax. The respondent contended that their services as Del Credre Agents fell under Business Auxiliary Service, which was not taxable before the budget of 2003. They relied on a High Court decision that classified similar services as Business Auxiliary Service. The Tribunal carefully considered both arguments.

3. The Tribunal noted that the respondent was appointed as a Del Credre Agent and received commission for their services. Although the agreement mentioned conducting market surveys, the respondent did not undertake such activities. The essential character of the service provided was that of a Del Credre Agent, classifiable under Business Auxiliary Service. The Tribunal applied the precedent set by the High Court decision in a similar case and dismissed the Revenue's appeal, finding no merit in reclassifying the services as Market Research Agency. The cross objection filed by the respondent was also disposed of accordingly.