2017 (5) TMI 1141 - AT - Service Tax

Tribunal classifies MLM as Business Auxiliary Service for tax, waives penalty under Section 80.

M/s. S. Harlalka Versus C.S.T. - Service Tax-Delhi

The Tribunal held that Multi Level Marketing activities should be classified under Business Auxiliary Service for service tax purposes. Due to ambiguity ... Business Auxiliary Services - activity of providing Multi Level Marketing to its principal - extended period of limitation - penalty - Held that: - the activity of Multi Level Marketing whether liable to levy of service tax was contentious issue, which was resolved by the Tribunal in the case of Charanjeet Singh Khanuja [2015 (6) TMI 585 - CESTAT NEW DELHI], holding that such activity should fall under the Business Auxiliary Service - there was ambiguity in interpretation of the statutory definition of Business Auxiliary Service, thus, the demand for extended period of limitation cannot be sustained - considering the fact that the appellant has not involved in the fraudulent activities concerning suppression fraud etc, the penalty imposed u/s 78 ibid can be set aside invoking Section 80 in the interest of justice. Matter remanded back to the original authority for quantification of service tax liability payable by the appellant within the normal period of limitation - appeal allowed by way of remand. Issues:Non-payment of service tax on providing Multi Level Marketing services; Ambiguity in interpretation of Business Auxiliary Service; Imposition of penalty under Section 78.Analysis:The appeal was filed against the order passed by the Commissioner (Appeals), Central Excise, New Delhi regarding the non-payment of service tax on providing Multi Level Marketing services to a principal company. The service tax Department confirmed the demand under Business Auxiliary Services for the period from April 2004 to March 2009.The appellant's advocate acknowledged that the services provided fell under the taxable category of Business Auxiliary Service based on a previous Tribunal decision. However, he argued that the demand should be limited to the normal period of limitation due to ambiguity regarding the levy of service tax on Multi Level Marketing activities. The advocate also contended that since there was no intent to evade payment of service tax, penalty under Section 78 should not be imposed.The Revenue's representative supported the findings in the impugned order. After hearing both parties and examining the records, the Tribunal noted that the issue of whether Multi Level Marketing activities were liable to service tax was contentious. The Tribunal referred to a previous case and concluded that such activities should fall under Business Auxiliary Service.Due to the ambiguity in interpreting the statutory definition of Business Auxiliary Service, the Tribunal held that the demand for an extended period of limitation was not sustainable. As there was no evidence of fraud or misstatement by the appellant to defraud the government revenue, the penalty under Section 78 was set aside. The Tribunal remanded the matter to the original authority for quantification of the service tax liability within the normal period of limitation, based on the appellant's concession of liability.In the interest of justice and considering that the appellant was not involved in fraudulent activities, the Tribunal invoked Section 80 to set aside the penalty imposed under Section 78. The appeal was disposed of with the above decisions, and the order was pronounced in open court on 31.03.2017.