2012 (12) TMI 579 - AT - Service Tax

Model not liable for service tax when agent pays: Tribunal decision on Business Auxiliary Service vs Advertisement Agency Service

The Tribunal held that the appellant, a model, fulfilled her service tax liability through her agent, Matrix, who was responsible for paying the tax on ... Business Auxiliary Service - discharge of service tax by agent - agent included within the definition of assessee - payment under wrong service category does not vitiate dischargeDischarge of service tax by agent - agent included within the definition of assessee - Appellant's service tax liability was discharged by her agent M/s Matrix on her behalf. - HELD THAT: - The Tribunal found on the admitted facts that the appellant engaged M/s Matrix as her agent to receive payment from clients and to discharge service tax liability on the appellant's promotional services. Applying the statutory concept that an 'assessee' includes his agent, the payment of service tax by M/s Matrix on amounts received for the appellant's services operated to discharge the appellant's service tax liability. The Tribunal held that the form of payment - i.e., made by the agent rather than the principal - satisfies discharge where the agent paid service tax on the activity in question on behalf of the assessee. [Paras 6, 7]Service tax liability of the appellant was held to be discharged through payment by her agent, M/s Matrix.Business Auxiliary Service - payment under wrong service category does not vitiate discharge - Payment of service tax by the agent under the category 'Advertisement Agency Service' did not negate that the agent had paid tax on behalf of the appellant for services classifiable as Business Auxiliary Service. - HELD THAT: - Although the activity performed by the appellant was treated as Business Auxiliary Service by the revenue, the Tribunal observed that M/s Matrix had in fact paid service tax and that payment could not be invalidated merely because it was paid under the head of Advertisement Agency Service. The Tribunal held that paying under a 'wrong head' does not mean the tax liability of the appellant remained undischarged when the agent had discharged the tax obligation on her behalf. [Paras 6]Payment by the agent under a different service category did not preclude treating the tax as discharged for the appellant's Business Auxiliary Service.Discharge of service tax by agent - Proceedings instituted by show-cause notice and adjudication were unwarranted once the agent had discharged the tax liability on behalf of the appellant. - HELD THAT: - Given the conclusion that the appellant's service tax liability had been discharged by her agent, the Tribunal held that continuation of demand and penalties against the appellant was not justified. The factual finding that the agent received payments and discharged the tax obligation on behalf of the appellant led to setting aside the impugned adjudication and associated penalties. [Paras 7, 8]The impugned demand and penalties were set aside and the appeal allowed with consequential relief.Final Conclusion: The Tribunal allowed the appeal, holding that the appellant's service tax liability for the period in question was discharged by her agent M/s Matrix (despite payment under a different service category), and therefore the show-cause proceedings, demand and penalties against the appellant were set aside. Issues:Demand of service tax under Business Auxiliary Service for the period 01.05.2006 to 09.09.2004 confirmed against the appellant along with interest and penalties.Analysis:The appellant, a model, was alleged to have provided services for promoting clients' products without paying service tax. Show-cause notices were issued, and demands were confirmed against the appellant. The appellant argued that her agent, Matrix, was responsible for receiving payments and discharging service tax on her behalf. The appellant contended that the service tax liability had been discharged by Matrix under Advertisement Agency Service, even though the activity fell under Business Auxiliary Service. The Revenue argued that the appellant had not paid service tax herself, and Matrix's payment under a different category did not absolve the appellant of liability.The Tribunal considered the appellant's role in promoting products through various media and agreed that the activity fell under Business Auxiliary Service. However, the appellant had appointed Matrix as her agent to handle payments and discharge service tax. The Tribunal noted that under the agreements, Matrix was responsible for paying service tax on the appellant's behalf. The Tribunal held that Matrix's payment under Advertisement Agency Service did not negate its role as the appellant's agent for discharging service tax liability. The Tribunal emphasized that the appellant, as the 'assessee,' had appointed Matrix as her agent, and Matrix had indeed discharged the service tax liability on her behalf.Based on the above analysis, the Tribunal concluded that the appellant had fulfilled her service tax liability through her agent, Matrix. Therefore, the proceedings against the appellant, including the demands confirmed in the impugned order, were deemed unwarranted. The Tribunal set aside the impugned order and allowed the appeal, providing consequential relief if necessary.