2018 (7) TMI 1446 - HC - Service Tax

Business Auxiliary Services - commission and brokerage received from the broker - Whether, without mentioned specific clause of business auxiliary services as mentioned U/s 65(19), the appellant can be held liable for all the services as mentioned in business auxiliary services for the purpose of service tax? - Held that - The Tribunal is not justified in holding that commission received from the broker would fall in the category of business auxiliary services and brokerage received on which service tax of ₹ 1,17,822/- is liable - demand cannot be upheld. The order passed in this appeal by the tribunal and any consequential order thereto are quashed and set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
Assessment of service tax on commission received from a broker under business auxiliary services without specific clause reference.

Analysis:
The appellant challenged the tribunal's decision regarding the assessment of service tax on commission received from a broker. The court framed a substantial question of law regarding the justification of categorizing the commission as business auxiliary services for taxation purposes without specific reference to the relevant clause. The appellant was issued a Show Cause Notice for short payment of service tax, non-payment of interest, and imposition of penalties under the Finance Act, 1994.

The court referred to a previous case where it was held that the appellant did not fit the description of an agency or agent for classification as a commission agent under Section 65(19) of the Finance Act, 1994. The court noted that the appellant did not enter into contracts with financiers or borrowers, and the commission received was not connected to the sale of any product or service. The court emphasized that the appellant did not fall under the category of a provider of business auxiliary services as per Section 65(19)(vii).

The court highlighted that the delay in issuing the notice was a ground of contention, and various legal references were made to support the appellant's argument. The court also mentioned a Supreme Court decision dismissing an appeal against a similar order. The Adjudicating Authority's failure to consider relevant factors was noted, and the court emphasized the need for a clear classification under the appropriate clause. The court ultimately quashed the orders of the Adjudicating Authority and the Appellate Authority, allowing the appeal in favor of the assessee.

In the judgment, the court addressed the concerns raised by both parties and emphasized the importance of clarity in classification for tax assessment purposes. The court's decision was based on the lack of proper classification under the relevant clause and the appellant's activities not aligning with the requirements for business auxiliary services. The court's detailed analysis and reference to previous cases and legal provisions supported the conclusion that the appellant was not liable for the service tax on the commission received from the broker.

The court's decision to quash the orders and allow the appeal indicated a thorough examination of the facts and legal arguments presented. The judgment provided a comprehensive analysis of the issues raised, highlighting the need for precise classification and adherence to statutory provisions in tax assessments. The court's ruling in favor of the assessee underscored the importance of clarity and consistency in applying tax laws to avoid ambiguity and potential misinterpretation.