2016 (3) TMI 1050 - AT - Service Tax

Eligibility for exemption from Service tax in terms of Notification No.13/2003-ST dated 20.06.2003 - Notification exempts from payment of Service Tax the Business auxiliary services provided by a commission agent - Engaged in marketing and selling of Indian Made Foreign Liquor (IMFL) for BDA LTD. - Consideration which the appellant was to receive for such services was linked to the quantum of goods actually sold - Commissioner denied the benefit of exemption on the ground that the activities performed by the appellant were much wider than that of a commission agent as defined in the Notification - Held that - the twin requirement of the definition of commission agent viz., that the agent should cause sale or purchase of goods on behalf of another person and that the consideration should be linked to the quantum of such sale or purchase, stand fully satisfied. In view of the specific definition of the expression commission agent in the Notification, we are not inclined to look at the common parlance meaning of the said expression or its meaning in the VAT Laws. A letter dated 23.03.2000 addressed to the Appellant by BDA Ltd., shows that the appellant s service charges were fixed with reference to the quantum of products marketed by it. The debit advice annexed to the appeal shows that the consideration received was always linked to the quantum of sales effected. This evidence seems to lend support to the contentions of the appellant and in the absence of any specific finding in the impugned order or any allegation to the contrary in the Show Cause Notice and also during the period relevant to this appeal, there is no evidence to show that the appellant had indeed carried out any activity other than the activity of selling goods belonging to BDA Ltd. On this factual ground also, the appellant is entitled to succeed. Even if the appellant has rendered services relating to procurement of goods on behalf of BDA Ltd., or helped in collection or recovery of payments, it would remain entitled to the benefit of exemption. - Decided in favour of appellant with consequential relief

Issues Involved:
1. Eligibility for exemption from Service Tax under Notification No.13/2003-ST.
2. Definition and scope of "commission agent" under the Notification.
3. Nature of services rendered by the appellant.
4. Applicability of Section 73(3) of the Finance Act, 1994.
5. Relevance of prior Tribunal judgments.

Detailed Analysis:

1. Eligibility for Exemption from Service Tax under Notification No.13/2003-ST:
The core issue was whether the services rendered by the appellant to BDA Ltd. during the specified period were eligible for exemption from Service Tax under Notification No.13/2003-ST dated 20.06.2003. The Notification exempts "Business auxiliary services" provided by a "commission agent." The Commissioner had denied the exemption, arguing that the appellant's activities extended beyond those of a commission agent.

2. Definition and Scope of "Commission Agent" under the Notification:
The Notification defines a "commission agent" as a person who causes the sale or purchase of goods on behalf of another person for a consideration based on the quantum of such sale or purchase. The Commissioner interpreted this narrowly, asserting that the appellant's broader activities disqualified them from the exemption. However, the Tribunal found this interpretation incorrect, stating that once an entity is identified as a commission agent, all business auxiliary services rendered by them are covered under the exemption.

3. Nature of Services Rendered by the Appellant:
The appellant argued that their services, although varied, were essentially those of a commission agent as defined in the Notification. The Tribunal agreed, noting that the appellant's activities, including engaging bottlers and collecting payments, were covered under the definition of "Business auxiliary services." The Tribunal emphasized that these services, if performed by a commission agent, are exempt under the Notification. The Commissioner's findings that the appellant was involved in selling IMFL/Beer for BDA Ltd. and that the consideration was linked to the quantity sold supported the appellant's claim.

4. Applicability of Section 73(3) of the Finance Act, 1994:
The appellant contended that having discharged the service tax liability, the provisions of Section 73(3) should apply, negating the need for a show-cause notice. The Tribunal did not specifically address this argument in the judgment, focusing instead on the primary issue of exemption eligibility.

5. Relevance of Prior Tribunal Judgments:
The Tribunal considered previous decisions, including those in the cases of Aditya Birla Nuvo Ltd. and Raj Wines, but found them distinguishable. In Aditya Birla, the denial of exemption was due to the nature of the consideration, which was a trading margin rather than a commission. In Raj Wines, the denial was based on the consideration not being linked to the volume of sales. In contrast, the appellant's consideration was directly linked to the quantity sold, aligning with the Notification's requirements. The Tribunal also referenced the Premier Enterprises case, which supported the appellant's position.

Conclusion:
The Tribunal concluded that the appellant's services fell within the scope of "Business auxiliary services" provided by a "commission agent" as defined in the Notification. Thus, the appellant was entitled to the exemption from Service Tax. The impugned order was set aside, and the appeal was allowed with consequential relief.

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