2014 (10) TMI 416 - AT - Service Tax

Trading activity of liquor products - Commission Agent service - exemption Notification No. 13/2003-S.T., dated 20-6-2003 - Held that - appellants have been appreciated for their splendid performance for the year 1995-96 and intimated the revised target fixed for them. The appellants have been informed that new year has just begun and it is time for them to look forward and plan. In the case of Allied Domecq, the letter starts with sentence stating that full reimbursement as promoter margin will be allowed on the Scotch Brands. Indeed the manufacturer of wines has indicated that they would be paying overriding commission of ₹ 15/- per 750 ml. bottle and an additional amount upto ₹ 15/- per 750 ml. bottle will be reimbursed towards discount/promotional give away scheme induced by them - activity of the appellant is not merely of the commission agent but in all the cases include promotional activities and further in some cases, the appellant performed as C & F agent also. Therefore, on the basis of the agreements/orders placed by the appellants, the appellant is not a mere commission agent but is providing Business Auxiliary Service. Since on the basis of facts of the case itself, I do not see any need to interfere with the order passed by the Commissioner (Appeals) - Decided against assessee.

Summary

Issues:
1. Liability to pay Service Tax as a commission agent.
2. Applicability of exemption Notification No. 13/2003-S.T.
3. Imposition of penalties under Sections 76 & 78 of the Finance Act, 1994.

Analysis:

1. The appellant claimed they were only a commission agent and thus not liable to pay Service Tax during the period in question. The representative submitted various purchase orders/contracts to support this claim. However, upon reviewing the agreements produced, it was observed that the appellant's activities went beyond that of a commission agent. The agreements with different manufacturers highlighted promotional activities, partnership formations, infrastructure provisions, and the provision of services beyond mere commission agent roles. The appellant was found to be providing Business Auxiliary Service based on the nature of the agreements and activities performed, including acting as a C & F agent in some cases. Consequently, it was determined that the appellant's activities did not align solely with those of a commission agent, leading to the rejection of the appeal.

2. The appellant had ceased paying Service Tax from 1-7-2003 to 30-6-2004, citing exemption Notification No. 13/2003-S.T. dated 20-6-2003. However, the review of the agreements and activities undertaken by the appellant revealed that they were engaged in activities beyond the scope of a commission agent, thereby negating the applicability of the exemption notification. The appellant's involvement in promotional activities, partnership formations, and provision of additional services indicated that they were providing Business Auxiliary Service, making them liable to pay Service Tax during the period in question.

3. While the original adjudicating authority confirmed the demand for Service Tax, penalties under Sections 76 & 78 of the Finance Act, 1994 were not imposed. The appeal against this decision was rejected, leading to the appellant approaching the tribunal. Despite the absence of penalties under Section 80 of the Finance Act, 1994, the rejection of the appeal was based on the appellant's activities being classified as Business Auxiliary Service rather than that of a commission agent. Therefore, the imposition of penalties under Sections 76 & 78 of the Finance Act, 1994 was not a subject of consideration in the appeal process, as the primary issue revolved around the nature of the appellant's services and liability to pay Service Tax.

This comprehensive analysis of the judgment highlights the key issues involved, the arguments presented by the appellant, and the tribunal's decision based on the nature of the appellant's activities and the applicability of Service Tax regulations.