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TMI Blog2011 (4) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents do lot of activities to promote sales of the products in a territory assigned to them. For some part of the sales they are acting as an Authorized Dealer. In such cases they buy the machines from JCBI and sell it to customers after loading a profit margin as agreed to between the parties. This part of the sales is not presently before us in any dispute. The dispute is about that part of the sales effected by JCBI directly in the territory assigned to the Respondent. For such sales the Respondents get a commission from JCBI as a percentage of the value of the sales. The question is whether such commission is eligible for exemption under notification 13/2003-ST. 5. The question before us is determinable based on the contract between the two parties and hardly on anything else. So we consider it to proper to reproduce the relevant portion of the contract which is reproduced below: "DEALER AGREEMENT This Agreement ("Agreement") is entered into at New Delhi on this 10th day of September 2003 By and between JCB INDIA LIMITED, a company registered under the Companies Act of 1956, having its registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quivocally agree that JCBI in its sole discretion shall be entitled to or in any manner curtail, delete or in any manner alter the geographical limits of the Territory without assigning any reasons or incurring any liability whatsoever, after giving a prior written notice of one month to the Dealer. 3. Dealer undertakes not to directly or indirectly, independently or jointly or otherwise in any manner promote, sell the Product outside the territory without prior written permission of JCBI. This is without prejudice to JCBI's other rights/remedies in the matter. 4. Dealer agrees that notwithstanding anything contained in this Agreement, JCBI has a right to market, sell and carry out after sale service of Products directly or through any other dealer within the Territory. 5. JCBI as its sole discretion may discontinue or change design of Products without incurring any liability for Products ordered on or delivered by JCBI. OBLIGATIONS OF THE DEALER 6. The Dealer shall make best possible effo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 13. The Dealer shall at all time keep available, in good condition, adequate number of all models of Products for purpose of demonstration to potential customer, if so desired by JCBI. 14. The Dealer shall, to the satisfaction of JCBI, set up an efficient, effective and speedy mechanism for receipt and disposal of complaints against the Products and request regarding sale, service and repair of Products. 15. The Dealer shall utilize only such spare parts for sale; servicing, repair or replacement as are supplied by JCBI or so authorized for said use by JCBI. 16. The Dealer shall always conduct his business with integrity and with good business sense and shall not in any case act in any manner detrimental to the interest and goodwill of JCBI. 17. The Dealer shall permit the authorized representative of JCBI, at all reasonable times, to inspect its premises, stocks, books of accounts. Dealer shall preserve all records for at least eight preceding years and the records of De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to fulfill its obligations under their Agreement, as per the guidelines established by JCBI and communicated to the Dealer from time to time. 24. JCBI may, in its sole discretion and absolute discretion, require the Dealer and the Dealer shall furnish a security to JCBI on the terms and conditions as specified by JCBI. The security may carry a fair rate of interest. The Dealer undertakes and agrees on the lien of JCBI on the machines and parts in Dealer stock and on the sundry debtors of the Dealer with the aim to cover the Exposure of the JCBI on the Dealer in terms of outstanding payments for the Product supplies and JCBI would have an absolute liberty to exercise their right in this regard to recover their dues at any time on JCBI's sole discretion. This in without prejudice to additional security which may be sought by JCBI at its discretion in terms of aforesaid clauses of the Agreement. 25. Notwithstanding anything to the contrary contained in this Agreement Dealer will be entitled to a margin on all such Products of the JCBI which are sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory forms and dues, if any, favouring JCBI and forwarding the same to JCBI forthwith. D WARRANTY 29. JCBI shall from time to time notify Dealer of its warranty policy on the Products and the obligations of the Dealer thereunder and the Dealer shall comply with the said policy both in letter and in spirit. 30. Each Product shall be dispatched by JCBI in forms with the Warranty Policy and there shall be no other warranty on the Products whether express or implied as to the merchantability or fitness of the Product. 31. The Dealer shall at the time of sale of Product forward the Warranty Certificate issued by JCBI, to the end user and shall affix his stamp thereon. Any claim under the warranty shall be made in the format prescribed by JCBI and within the time limit prescribed in the Warranty Policy. D. JCBI - DEALER RELATIONSHIP. 32. It is expressly understood and agreed by and between JCBI and the Dealer that their business re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertakes to indemnify and hold harmless JCBI against any losses, damages, penalties, third party liabilities arising out of any proceeding or actions arising out of or in connection with. a. Any act of omission or commission or failure on part of the Dealer or otherwise to obtain any requisite permit/permission to comply with any mandate of law, in force from time to time. b. Any damage, loss arising out of any act of omission or commission on the part of Dealer or his personnel; c. Any unauthorized use or misuse of any Trade Mark, Brand Name, intellectual or other property of JCBI; d. Any damage, claim, loss arising out of any breach of any of the terms of this Agreement and e. Any third party claim or liability arising out of or in connection with any act of omission or commission on part of the Dealer, its agents, employees, servants and pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the business auxiliary services provided by a commission agent from the service tax leviable thereon under sub-section (2) of section 66 of the said Act. Explanation.- For the purposes of this notification, "commission agent" means a person who causes sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase. 2. This notification shall come into force on the 1st day of July, 2003. [F.No. B3/7/2003-TRU]" 10. Revenue relies on covenant 32 of the agreement reproduced above where it is specifically stated that either of the parties shall not act as an agent of the other. Since the Respondent could not have acted as an agent of JCBI, there cannot be a question of acting as a commission agent. Revenue also points out covenants 14, 15, A-9 etc to argue that the role of the Respondent was more than that of a Commission Agent 11. The Respondent on the other ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services of clearing and forwarding agent vis-a-vis commission agent. The issue in dispute depends on the terms of the contract. Since the terms of contracts in different cases will be different, there cannot be any uniform case law relating to such issues. 16. The Respondent has raised the argument that the demand is time barred. It is seen that these impugned Commissions were not reported in ST3 returns filed. An assessee on his own giving an interpretation of law and not bringing the relevant matters to the notice of the department will be a fit case for invoking extended period of time. 17. The Respondent has also raised the issue that the amounts realized has to be considered as cum-tax amount and tax liability should be re-computed on the basis of principle laid down in CCE Vs. Maruti Udyog Ltd-2002 (49) RLT 1 SC. In this matter the Respondent succeeds and the Revenue is directed to re-work the tax liability accordingly. 18. It is noticed that the order-in-original imposes penalty both under section 76 and 78 of Finance Act 1994. Since 10.5.2008, it is expressly provided in section 78 that penalties under section 76 and 78 cannot be imposed at the same time. Since these p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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