2017 (3) TMI 871 - AT - Service Tax

Tribunal Rules in Favor of Broker, Rejects Service Tax Classification Appeal

The Tribunal allowed the appeal, setting aside the Commissioner's order that classified the appellant's activity as 'Business Auxiliary Services' for ... Finance broker - whether covered under Business Auxiliary Services or not? - Held that: - an identical issue stand decided by the Tribunal in the case of Fulchand Tikamchand [2016 (2) TMI 772 - CESTAT MUMBAI], where it was held that in view of an equation that is devoid of an agency relationship with the financier and rules out the provision of a service on behalf of the borrower from whom the appellant receives consideration, the activities of the appellant are outside the ambit of “business auxiliary service” - demand set aside - appeal allowed - decided in favor of appellant. Issues:Classification of activity under 'Business Auxiliary Services' - Service tax liabilityAnalysis:The appeal challenged an order by the Commissioner (A) Jaipur regarding the classification of the appellant's activity as a finance broker. The appellant's role involved connecting lenders with borrowers and receiving a commission for successful transactions. The Revenue contended that the activity fell under 'Business Auxiliary Services' as per section 65(105)(zzb), leading to a service tax demand of Rs. 2,22,284.During the proceedings, the appellant argued that their activity did not fit the criteria of 'Business Auxiliary Services' as they did not fall under any sub-clauses of the definition. The appellant's counsel highlighted that the consideration was received from the borrower, not the lender, indicating that the activity did not align with the classification under consideration.In support of their argument, the appellant cited a Tribunal decision in the case of Fulchand Tikamchand, emphasizing that the appellant did not act as an agent for either the financier or the borrower. The Tribunal's ruling in the cited case clarified that the appellant's activities did not meet the criteria for classification as a commission agent under section 65(19) of the Finance Act, 1994.The Tribunal further elaborated that the appellant's receipt of commission from borrowers, who did not have products or services to market, distinguished them from commission agents involved in the sale of goods or services. The circular referenced in the impugned order, which pertained to automobile dealers receiving commission for promoting auto loan packages, was deemed inapplicable to the appellant's case.Ultimately, the Tribunal allowed the appeal, setting aside the impugned order based on the precedent set in the Fulchand Tikamchand case. The Tribunal concluded that the appellant's activities did not fall within the scope of business auxiliary services, as they did not establish an agency relationship with financiers and did not provide services on behalf of the borrower from whom they received consideration.In light of the above analysis, the Tribunal ruled in favor of the appellant, holding that the impugned order was unsustainable and allowing the appeal accordingly.