2019 (5) TMI 658 - AT - Service Tax

Classification of services - Business Auxiliary services or not - society commission received for procurement of sugar through various societies formed at district level which controlled the sale of sugarcane by the farmers to the appellant - HELD THAT - Under Business Auxiliary Service, commission is treated as consideration when such commission is received for promotion or marketing of sale of goods or for providing service or for providing Customer Care Service or for arranging procurement of goods for the clients. In the present case appellant is not engaged in promotion of any sale of goods on behalf of anybody else, nor any service, nor any activity being undertaken on behalf of the clients. Clear meaning of the transaction is that when sugarcane is purchased by the appellant, some amount is received back from the seller of the sugarcane. It clearly means that it is a type of discount. Thus, the appellant had provided any Business Auxiliary Service . Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of 'Business Auxiliary Service' under service tax law for commission received by a sugar manufacturer from societies controlling sugarcane sale.

Analysis:
The case involved the appellant, a sugar manufacturer, procuring sugarcane through societies at the district level. The societies controlled the sale of sugarcane to the appellant and made payments to the appellant, which were treated as 'society commission' under 'other income' in the balance sheet. The revenue authorities considered this commission as consideration for 'Business Auxiliary Service,' leading to a service tax demand of approximately ?24 lakhs for the period from October 2008 to February 2014. The key issue was whether the commission received by the appellant fell under the ambit of 'Business Auxiliary Service.'

Upon perusal of the record, the Tribunal noted that under Business Auxiliary Service, commission is considered as consideration when it is received for promotion or marketing of goods, providing services, customer care services, or arranging procurement of goods for clients. However, in this case, the appellant was not engaged in any such activities. The transaction was essentially a form of discount where the appellant received some amount back from the sugarcane sellers upon purchasing sugarcane. Therefore, the Tribunal concluded that the appellant had not provided any 'Business Auxiliary Service.'

Based on the above analysis, the Tribunal held that the impugned order was not sustainable and set it aside. Consequently, the appeal was allowed, ruling in favor of the appellant. The judgment provided clarity on the interpretation of 'Business Auxiliary Service' in the context of commission received by a sugar manufacturer from societies controlling sugarcane sale, establishing that such transactions may not always fall within the scope of taxable services under the law.