2025 (1) TMI 934 - AT - Service Tax

Levy of service tax - Business Auxiliary Services - incentives received by the appellant - if it is chargeable to service tax then whether the demand on the entire amount shown under the Heading Commission and Incentive is chargeable to service tax or otherwise? - HELD THAT - It is an admitted fact that based on the Profit Loss Account the Department has raised the demand and this is based on the reflection of Commission and Incentive under the same Heading. There was no bifurcation given for the commission and incentive separately either in the Profit Loss Account or in the course of adjudication - in view of the fact that there is no bifurcation of commission and incentive therefore the amount of incentive that would not be required to be subjected to service tax needs to be worked out. Moreover as pointed out in the Order-in-Original the claim of the appellant that both the commission and incentives were reflected together in Profit Loss Account is not disputed but as no supporting documents could be adduced by them to clearly bifurcate the quantum of commission and incentive separately the relief sought was denied. Conclusion - Incentives are not liable to service tax under the category of Business Auxiliary Services unless clearly documented and bifurcated from commissions. The matter is required to be remanded back to the Original Adjudicating Authority who shall decide the total quantum of commission and total quantum of incentive separately to come to the final demand - Appeal is allowed by way of remand.

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily revolves around the following core legal questions:

Whether the incentives received by the appellant are chargeable to service tax under the category of Business Auxiliary Services.
If chargeable, whether the entire amount shown under the heading "Commission and Incentive" is liable for service tax.
Whether the adjudicating authority's order was non-speaking and if it traversed beyond the show cause notice.
Whether the demand for service tax is barred by limitation due to a lack of suppression of facts.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Chargeability of Incentives to Service Tax

Relevant legal framework and precedents: The appellant referred to the Larger Bench judgment in Kafila Hospitality & Travels Pvt Ltd. vs. Commissioner of Service Tax, Delhi, which settled that incentives are not liable to service tax.
Court's interpretation and reasoning: The Tribunal acknowledged the precedent set by the Larger Bench, indicating that incentives should not be subjected to service tax.
Key evidence and findings: The appellant failed to provide documentary evidence to bifurcate the amounts received as commission and incentives.
Application of law to facts: Due to the lack of bifurcation, the Tribunal could not ascertain the exact amount of incentives that should be exempt from service tax.
Treatment of competing arguments: The Tribunal recognized the appellant's argument based on precedent but noted the absence of evidence to support their claim.
Conclusions: The Tribunal concluded that incentives are not liable to service tax; however, the exact quantum needed to be determined.

Issue 2: Non-speaking Order and Traversing Beyond Show Cause Notice

Relevant legal framework and precedents: The appellant argued that the order was non-speaking and exceeded the scope of the show cause notice.
Court's interpretation and reasoning: The Tribunal noted the appellant's contention but focused on the need for further evidence and a proper speaking order.
Key evidence and findings: The Tribunal found the original order lacked detailed reasoning regarding the bifurcation of commission and incentives.
Application of law to facts: The Tribunal deemed it necessary for the adjudicating authority to reassess the evidence and issue a speaking order.
Treatment of competing arguments: The Tribunal did not directly address the non-speaking order issue but implied the need for clarity in the adjudicating authority's decision.
Conclusions: The matter was remanded for a fresh decision with a requirement for a speaking order.

Issue 3: Limitation and Suppression of Facts

Relevant legal framework and precedents: The appellant claimed the demand was time-barred due to no suppression of facts.
Court's interpretation and reasoning: The Tribunal acknowledged the issue but noted it was not raised as a ground in the appeal.
Key evidence and findings: The Tribunal suggested that the original authority should consider this aspect upon remand.
Application of law to facts: The Tribunal instructed the adjudicating authority to evaluate the suppression issue based on the documents and case laws presented.
Treatment of competing arguments: The Tribunal did not make a definitive ruling on limitation but left it for reconsideration by the original authority.
Conclusions: The issue of limitation and suppression was left open for further examination.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The issue regarding levy of service tax on incentive received from Airlines is now settled by the judgment relied upon by the Learned Advocate and therefore there cannot be any levy of service tax on incentives received."
Core principles established: Incentives are not liable to service tax under the category of Business Auxiliary Services unless clearly documented and bifurcated from commissions.
Final determinations on each issue: The matter was remanded to the Original Adjudicating Authority to determine the quantum of commission and incentives separately and to issue a speaking order. The issue of limitation was also to be reconsidered.

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