2018 (11) TMI 28 - AT - Service Tax

Valuation - inclusion of subvention charges in assessable value - Business Auxiliary Services - direct selling agent services provided by appellant to ICICI Bank - It has been argued that the service tax should be denied only on the amount received by them net of subvention - Held that - The issue is decided in the case of COMMISSIONER OF SERVICE TAX, MUMBAI VERSUS M/S. JAYBHARAT AUTOMOBILES LTD. AND VICE-VERSA 2015 (8) TMI 503 - CESTAT MUMBAI , where it was held that the amount of commission paid by the bank for promotion of their financial products by the appellant to customers is subject to payment of Service Tax - thus, as far as the valuation of services is converned the rejection of subvention cannot be permitted in light of above decision. Extended period of limitation - Held that - There is no scope for interpretation or doubt in this regard and thus there cannot be any bonafide doubt regarding taxability of the service provided by the appellant - there is no merit in the argument on limitation canvassed by the Ld. Counsel. Appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against demand of service tax for direct selling agent services provided to ICICI Bank, valuation of service tax based on commission received, inclusion of subvention in taxable value, invocation of extended period of limitation.

Analysis:

1. Demand of Service Tax:
The appeals were filed against the order confirming the demand of service tax for direct selling agent services provided to ICICI Bank. The appellant argued that they identified customers for car loans from the bank and received commission, which they believed should not be taxed. However, they admitted that a previous decision had settled the taxability issue against them. The appellant contended that they were under a genuine belief that the services were not taxable due to confusion at the time. The Tribunal noted that the appellant did not contest the demand on merit but disputed the valuation, specifically arguing that service tax should only be charged on the net amount received after deducting subvention.

2. Valuation and Inclusion of Subvention:
The appellant argued that the amount received from the bank should be taxed only after deducting the subvention offered to customers. However, the Tribunal referred to previous decisions and held that the commission paid by the bank for promoting financial products was subject to service tax. The Tribunal emphasized that the appellant had the opportunity to clarify discrepancies with the bank but failed to do so. Therefore, the tax should be calculated based on the commission declared by the bank, irrespective of any direct payments to customers.

3. Extended Period of Limitation:
Regarding the invocation of the extended period of limitation, it was found that one of the appellants was not registered with the Service Tax Department and did not file returns. The Tribunal stated that the definition of Business Auxiliary Services clearly includes promotion or marketing services, leaving no room for doubt. As there was no genuine doubt about the taxability of the services provided by the appellant, the argument on limitation was dismissed.

4. Conclusion:
Ultimately, the appeals were dismissed by the Tribunal. The decision was pronounced on 18th October 2018, upholding the demand for service tax on the commission received for direct selling agent services provided to ICICI Bank. The Tribunal rejected the appellant's arguments on valuation and limitation, emphasizing the clarity of the taxability of the services provided.