2018 (5) TMI 1060 - AT - Service Tax

Business Auxiliary Services - whether the activity of the appellant which is in the form of, business auxiliary service , as claimed by Revenue, in the multilevel marketing is taxable or otherwise? - Held that - the issue is now settled by the judgment of this Tribunal in the case of Charanieet Singh Khanuja v. Commissioner of Service Tax, Indore/Lucknow/Jaipur 2015 (6) TMI 585 - CESTAT NEW DELHI , where it was held that service tax would be chargeable on the commission received by a Distributor from Amway on the products purchased by his sales group. For quantifying the Service tax demand on the commission received from Amway on the volume of purchase made by the distributors sponsored /enrolled by a particular distributor i.e. the Distributor s sales group, these matters would have to be remanded to the Original Adjudicating Authority. Following the same, the matter is remitted back to the adjudicating authority to reconsider the issue in the light of the direction given by the Tribunal in the case of Charanjeet Singh Khanuja - appeal allowed by way of remand.

Summary

Issues involved:
Taxability of business auxiliary service in multilevel marketing.

Analysis:
The judgment pertains to appeals challenging the taxability of the appellant's activity in the form of 'business auxiliary service' in multilevel marketing. The issue revolves around whether the appellant's role as a distributor in the multilevel marketing of products is taxable. The Tribunal referred to a previous judgment in the case of Charanjeet Singh Khanuja, emphasizing that the sale of goods by a distributor, once purchased from the client, does not constitute a service to the client. Therefore, no service tax is chargeable on the profit earned by distributors from selling goods purchased from the client. However, the activity of a distributor in identifying other persons for marketing Amway products and receiving commission based on their performance is considered a business auxiliary service. In such cases, service tax is chargeable on the commission received by the distributor. The Tribunal highlighted the need for distinguishing between the commission earned by a distributor based on their own purchases and the commission earned on the purchases made by their sales group.

The Tribunal set aside the impugned order and remitted the matter back to the adjudicating authority for reconsideration. The adjudicating authority is directed to follow the principles of natural justice and consider the judgment in the Charanjeet Singh Khanuja case, specifically paragraphs 12 and 13, to determine the correct taxable amount in respect of the appellant. The decision to remand the matter indicates that a more detailed assessment is required to ascertain the taxability of the appellant's activities in multilevel marketing. The judgment emphasizes the importance of proper evaluation and adherence to legal principles in determining the tax liability in such cases.

In conclusion, the appeals were disposed of by way of remand to the adjudicating authority, highlighting the need for a thorough reassessment based on the Tribunal's directions and the principles outlined in the Charanjeet Singh Khanuja case. The judgment underscores the significance of a nuanced approach in determining the tax implications of activities in multilevel marketing, ensuring a fair and accurate assessment in accordance with legal provisions and precedents.