2015 (1) TMI 949 - HC - Service Tax

Court upholds Tribunal decision: Assessee not liable for Service Tax under primary claim/retailer scheme.

UNION OF INDIA Versus RAJ WINES

The High Court upheld the Tribunal's decision, ruling that the Assessee was not liable to pay Service Tax on the amount under the primary claim/retailer ... Valuation - inclusion of reimbursement of expenses - Whether in the facts and circumstances of the case, the Assessee was liable to pay Service Tax on the amount received under the head - Primary claim/Retailer scheme or not - Held that:- Section 67 of the Act is titled as ‘Valuation of taxable services for charging Service Tax’. It defines how the valuation of taxable service is to be calculated on which the Service Tax is to be paid by the Assessee. - The amount shown under the head of primary claim/retailer scheme is the amount which the service provider had given to the retailers on behalf of SBL for achieving certain quota of sales. It was then reimbursed to it. - Commissioner (Appeals) after discussing the material on record, has recorded a finding that this was the expense that was done by the Assessee as a pure agent of SBL and this finding has been upheld by the Tribunal. - There is no illegality in the reasoning or in the finding. - Decided against Revenue. Issues: Tax appeal against Tribunal's order partly dismissing the appeal of the Central Excise Department in respect of an Assessee for a specific period.Analysis:1. Facts: The Assessee marketed and promoted various liquors, receiving payments but not depositing Service Tax. The total amount received was distributed into different items.2. Show Cause Notice: The Adjudicating Officer issued a notice asking the Assessee to explain why Service Tax, interest, and penalty should not be levied on the amount received.3. Orders: The AO confirmed the Service Tax, interest, and imposed penalties. The Commissioner (Appeals) partly allowed the appeal, reducing penalties.4. Appeals: The Department appealed to the Tribunal, which partly allowed the appeal, holding the Assessee liable for Service Tax on specific items.5. Decision: The High Court framed a substantial question of law regarding the Tribunal's order, focusing on the Assessee's liability for Service Tax under specific heads.6. Legal Provisions: Sections 67 and 94 of the Finance Act empower the government to frame rules for valuation of taxable services and carry out provisions of the Act.7. Rules: Rule 5 of the Service Tax (Determination of Value) Rules, 2006, deals with the inclusion or exclusion of certain expenditure or costs in the value of taxable services.8. Primary Claim/Retailer Scheme: The amount under this head was considered an expense incurred by the Assessee as a pure agent of another entity, which was reimbursed. The Commissioner (Appeals) and Tribunal upheld this finding.9. Judgment: The High Court found no illegality in the reasoning or findings, dismissing the appeal as lacking merit. The Assessee was not liable to pay Service Tax on the amount under the primary claim/retailer scheme.