2017 (2) TMI 154 - AT - Service Tax

Levy of tax - commission received from the multiple/chain marketing of products - time limitation - Held that - the service tax liability for the amount as commission/consideration by appellant by operating multiple/chain marketing system is clearly taxable under Business Auxiliary Service as held by the Tribunal in the case of Charanjeet Singh Khanuja 2015 (6) TMI 585 - CESTAT NEW DELHI - demand of tax confirmed. Time limitation - the SCN is issued on 18.08.2009 demanding service tax for the period May 2006 to October 2008 - Held that - extended period cannot be invoked for the demand of service tax liability on the amount received as commission from multiple/chain marketing system - the service tax liability within the period of limitation from the date of issuance of SCN is liable to be paid along with interest. Levy of tax - amount of profit in trading activity - Held that - being trading activity during the relevant period was not taxable under the Business Auxiliary Service as the appellant was undertaking the purchase and sale of goods of M/s. Amway - no levy of tax. Imposition of penalties - Held that - the appellant had justified the case for non-discharging of tax liability. Accordingly, the penalties imposed on the appellant are set aside. Appeal disposed off - decided partly in favor of assessee.

Summary

Issues:
Service tax liability on commission received as a distributor of a company and incentives for marketing activities; Applicability of Business Auxiliary Service; Period of limitation for tax demand; Tax liability on trading activity; Imposition of penalties.

Analysis:

1. Service Tax Liability on Commission and Incentives:
The appellant was held liable for service tax on the commission received as a distributor of a company and incentives for marketing activities. The Tribunal referred to a previous judgment in the case of Charanjeet Singh Khanuja, where it was held that such income falls under Business Auxiliary Service. The Tribunal found the appellant's arguments lacking merit and upheld the service tax liability.

2. Period of Limitation:
The show-cause notice for tax demand was issued on 18.08.2009 for the period May 2006 to October 2008. The appellant argued a bonafide belief regarding tax liability, similar to the case of Charanjeet Singh Khanuja. The Tribunal, considering the previous judgment, held that the extended period of limitation cannot be invoked. The demand for service tax within the normal limitation period from the date of the notice was upheld.

3. Tax Liability on Trading Activity:
Regarding the tax liability on the profit from trading activity (difference between purchase and sale price), the Tribunal ruled that during the relevant period, such trading activity was not taxable under Business Auxiliary Service. As the appellant was engaged in the purchase and sale of goods, the service tax liability did not arise for this amount.

4. Imposition of Penalties:
The Tribunal considered the issue of penalties and noted that since the matter was a question of interpretation that got settled by the Tribunal, the appellant could have genuinely believed in the non-taxability of the amounts received. Consequently, the penalties imposed on the appellant were set aside.

In conclusion, the appeal was disposed of with the Tribunal upholding the service tax liability on commission and incentives, determining the period of limitation for tax demand, clarifying the tax liability on trading activity, and setting aside the penalties imposed on the appellant based on the justifiable belief in non-taxability.