Tribunal grants waiver of service tax & penalties, citing no double taxation on mutual fund commission.

The Tribunal ruled in favor of the applicants, granting a waiver of the entire service tax and penalties demanded by the department. Citing a previous decision, the Tribunal held that there should be no double taxation on the commission received for distributing mutual fund units, as the main contractor had already paid the service tax. The Tribunal found a strong prima facie case in favor of the applicants and stayed the demand pending appeal, based on the precedent set by a Larger Bench decision.

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Issues involved: Demand of service tax on commission received for distribution of mutual fund units from 9.7.2004 to 31.3.2005.

Analysis:
The case revolved around the demand of service tax on the commission received by the applicants for distributing mutual fund units during a specific period. The applicants had an agreement with a main contractor who entered into agreements with mutual fund companies for investment services. The mutual fund companies paid commission to the main contractor, who then shared a portion with the applicants. The issue arose when the department issued a show cause notice demanding service tax on the commission received by the applicants from the main contractor.

The advocate for the applicant argued that since the main contractor had already discharged the service tax liability on the commission, the applicants should not be liable for double taxation as per the Finance Act. The advocate relied on a previous decision by the Tribunal in the case of M/s. Vijay Sharma & Company vs. Commissioner of Central Excise, Chandigarh. The Tribunal in the mentioned case had held that there is no provision for double taxation under the Finance Act, and if a sub-broker has paid service tax on a taxable service provided to the main broker, the main broker is entitled to credit for the tax paid.

Considering the arguments presented and the precedent set by the Larger Bench in the case of M/s. Vijay Sharma & Company, the Tribunal found a strong prima facie case in favor of the applicants. Consequently, the Tribunal granted waiver of the entire service tax and various penalties under the Finance Act, staying the demand during the pendency of the appeal. The judgment was pronounced in open court on 11.2.2011.

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