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TMI Blog2015 (6) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... n for Business Auxiliary Service of sales promotion provided to Amway. Therefore, service tax would be chargeable on the commission received by a Distributor from Amway on the products purchased by his sales group. However, in the impugned orders service tax has been demanded on the gross amount of commission and no distinction has been made between the commission earned by a Distributor from Amway based on his own volume of purchase from Amway and the commission earned by him on the basis of the volume of purchases of Amway products made by his sales group i.e. group of second level of Distributors appointed by Amway on being sponsored by the Distributor. - Matter remanded back. Whether duty exemption under notification no.5/2006-ST would be admissible to the Distributors in this group of cases - distributors are engaged in promoting sales/marketing of the products of Amway and they are not marketing or promoting any taxable service which is branded and the brand name belongs to another person. Marketing or sale promotion of branded products by a person/ commission agent does not amount to providing branded service by him and hence, marketing or sales promotion of a branded produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice lesser than the MRP, the difference between the sale price not exceeding the MRP and the purchase price (DAP) is the Distributors profit margin. Besides this, as per the marketing policy of Amway, a distributor is entitled to commission based on the monthly volume of purchases made by him from Amway for direct sale to the consumers or for personal consumption. This commission is linked to the volume of purchases made by a Distributor from Amway in a month. The distributors appointed by Amway can also sponsor/enroll other persons for marketing of the Amway products. These second level Distributors enrolled through a particular Distributor can directly purchase the products from Amway for selling the same. Based on the volume of the Amway products purchased by such second level distributors, the Distributors through whom they are enrolled, are paid commission and other incentives by Amway. This commission is also paid on monthly basis. Thus, under the direct selling/multi-level marketing concept of Amway, a distributor earns monthly income in three ways (a) by directly selling the Amway products purchased from Amway and the difference between his purchase price (DAP) and the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anjeet Kaur & Ors. 01.07.2003 to 31.03.2005 11.09.2008 15,773/- 12. ST/502/2011 Shuddhatm Bharil 01.07.2003 to 31.03.2008 24.10.2008 18,69,606/- 13. ST/580/2011 Atul Sondhi 01.04.2006 to 31.03.2008 09.01.2009 3,06,391/- 14. ST/1123/2011 Paramjeet Kaur Amol 01.07.2003 to 31.03.2006 25.09.2009 1,08,052/- 15. ST/1383/2011 Rajveer Singh 01.04.2004 to 31.03.2008 13.04.2009 6,97,800/- 16. ST/1781/2011 Shekhar Chaudhary 2006-07 and 2007-08 19.03.2009 3,75,546/- 17. ST/1802/2011 Nitesh Dixit 01.07.2004 to 31.07.2008 16.10.2008 6,63,113/- 18. ST/56/2012 Paramjeet Amole July, 2003 to March, 2005 25.09.2009 77,599/- 19. ST/86/2012 Ritu Rastogi July, 2003 to Sep.2008 24.10.2008 29,00,676/- 20. ST/126/2012 Ritu Rastogi Oct. 2003 to March, 2008 --- 26,64,121/- 21. ST/645/2012 Kavita Sukhija 01.04.2003 to 31.03.2010 20.04.2009 2,65,403/- 22. ST/1723/2012 Ms.Sangeet 01.04.2003 to 31.03.2009 11.09.2009 39,862/- 23. ST/1724/2012 Deepak Batish 01.04.2003 to 31.03.2008 20.04.2009 1,50,006/- 24. ST/2337/2012 Sanjiv Gandhi 2003-04 to 2006-07 20.04.2009 2.02,346/- 25. ST/2810/2012 Rajan Sachdev 2003-2004 to 2007-08 20.04.2009 2,40,322/- 26. ST/851/2012 CCE Vs.Ajeet Singh 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue is in appeals. 5. Heard both the sides. 6. Shri Kapil Kher, Sr.Advocate, Shri J.K. Mittal, Advocate, Shri Vineet Singh, Advocate, Shri Abhisek Jaju, Advocate, Shri Sidhant Jain, Advocate, Shri Nitish Garg, Advocate and Shri Kamal Gupta, Advocate, ld. Counsels representing the Appellants in appeals nos. ST/138 and 139/2009, ST/406/2010, ST/522 to 525, ST/257,259, 433,473,502,580,1123,1383,1781 & 1802/2011, ST/56, 86, 126, 645/2012 and ST/1723-1724, 2337 and 2810/2012 and the respondents in appeals nos. ST/851 to 854, 863, 864, 865, 866, 867, 868, 869, 870 and 878/2012 made the following submissions:- (1) The persons in these cases from whom service tax is sought to be recovered are distributors of Amway, who during the period of dispute purchased the Amway products and sold the same. They are not engaged in promoting the sales of Amway products. The Department has confirmed service tax demands on the entire amount of sales commission received from Amway, a substantial portion of which is the sale incentives received on certain volume of purchase of the Amway products made by the Distributor from Amway during a particular month. (2) There is no specific allegation as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (Appeals) reiterating the grounds of appeals in respect of appeals nos. ST/851 to 854, 863, 864, 865, 866, 867, 868, 869, 870 and 878/2012 filed by the Revenue. He emphasized that the activities of the Distributors of Amway in these cases is covered by the definition of Business Auxiliary Service under Section 65(105)zzb read with Section 65(19)(i) of the Finance Act, 1994 and in this regard, he cited the judgement of the Tribunal in the case of (a) Shri Surendra Singh Rathore & Ors. Vs. CCE, Jaipur-I reported in 2013 (3)ECS 224 (Tribunal-Delhi) and also in the case of Shri Mahaveer Saharan Vs. CCE & ST, Jaipur - Final Order No.57681/2013 dated 19.09.2013, wherein the Tribunal has held that the Right Concept Marketing (RCM) of M/s. Fashion Suitings Pvt. Ltd., Bhilwara is a multi level marketing scheme and the consideration/commission received by the appellants from M/s.Fashion Suitings Pvt. Ltd. (FASL) is the result of the marketing/promotion of FASL products and hence, constitutes Business Auxiliary service provided in respect of FASL products to FASL and the same would be taxable under Section 65(105)(zzb) read with Section 65(19)(i) of the Finance Act, 1994. Shri D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the MRP fixed by the Amway. The Distributors, in turn, can sponsor a second level of distributor who are also appointed as distributors by Amway and besides selling the Amway products purchased Amway, they also promote the marketing of the Amway products. As per the Amway Business Plan, a distributor has three streams of income (a) a distributor of Amway products purchases the products from Amway at the DistributionsAcquisition Price (DAP) and sells them in retail at the price not exceeding the MRP as fixed by the Amway. The difference between the retail sale price and the DAP is the Distributors profit margin. (b) Besides above, the Distributor also gets a commission from Amway from 6% to 21% depending upon the purchases of Amway products during the month for sale or for personal consumption. Thus, depending upon the purchases made by the distributor during a month from Amway, he gets a commission/bonus varying from 6% to 21%. This is the second stream of income of the distributor; (c) A Distributor also gets monthly commission on the basis of the success and productivity as defined by the products sales of the distributors appointed through him which constitute his sales group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods from Amway at the Distributors Acquisition Price (DAP)) and sell the same in retail at price not exceeding MRP fixed by the Amway. This activity of the Distributors, in our view, cannot be treated as promotion, marketing or sale of the goods produced or provided by or belonging to the client (Amway), as the sale of the goods purchased by the Distributors from Amway is not the sale of the goods belonging to their client Amway. Once the Amway products have been purchased by a Distributor from Amway, those products cease to belong to Amway, but belong to the Distributor and sale of these goods by the Distributor would not constitute service to Amway. For the same reason, any incentive or commission received by a Distributor from Amway for buying certain quantum of goods from Amway during a month can not be treated as the consideration received for promotion or marketing or sale of the goods produced by or provided by or belonging to the client, more so, as this commission is not linked to the goods sold by the Distributor, but is linked to the goods purchased by the Distributor from Amway during a month and is in the nature of volume discount. Therefore, no service tax is char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is plea as a business concern can be a proprietary firm also which is owned by an individual and there is no difference between proprietary firm owned by a person and that person. When an individual engages himself in a commercial activity, he has to be treated as business or commercial concern. Therefore, notwithstanding the fact that w.e.f. 1.5.2006 the term, commercial concernin Section 65(105)(zzb) was replaced by any person, we are of the view that even during the period prior to 1.5.2006, the Business Auxiliary Service, even if provided by an individual to a client, was taxable. Moreover, in this group of appeals, the Appellants in Appeal No.ST/257/2011 and ST/259/2011 are proprietary firms who, without any doubt, are commercial concerns. 15. Another point of dispute is as to whether duty exemption under notification no.5/2006-ST would be admissible to the Distributors in this group of cases. In this regard, the Departments plea is that this exemption is not applicable when the taxable service is provided by a person under a brand name/trade name, whether registered or not, of another person and in this group of cases, the Distributors have promoted the sale/marketing of bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessees was taxable under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994, there was no scope for doubt. As held by the Apex Court in the case of Continental Foundation Joint Venture Vs. CCE, Chandigarh reported in 2007 (216) ELT 177 (SC) when there is scope for doubt in the mind of an assessee on a particular issue, the longer limitation period, under proviso to Section 11 A(1)cannot be invoked and in our view, the ratio of this judgement of the Apex Court is applicable to the facts of these cases. Therefore, the longer limitation period of 5 years under proviso to Section 73(1) of the Finance Act, 1994 would not be invokable and duty can be demanded only for normal limitation period of one year from the relevant date.
17. In view of the above discussion, the impugned orders passed by the Commissioner (Appeals) are set aside and the matters are remanded to the Original Adjudicating Authority for de novo adjudication strictly in terms of our observations and directions in this order. The appeals filed by the Distributors (assessee) as well as those filed by the Department stand disposed of as above.
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