Recovery agent denied tax exemption, demand time-barred; appeal allowed.

The Tribunal held that the appellant, a recovery agent for ICICI Bank, was not entitled to exclude 80% of the commission from service tax payment as they did not meet the conditions to be considered a pure agent. Additionally, the demand for service tax was deemed time-barred as the appellant consistently reflected their position in their returns and sought clarification from the authorities. Consequently, the show cause notice issued in 2011 for the period 2006-07 to 2008-09 was set aside, and the appeal was allowed on 04.08.2017.

---

---

Issues:
1. Entitlement to exclude 80% of commission received from ICICI Bank while paying service tax.
2. Whether the demand for service tax is time-barred.

Entitlement to Exclude 80% of Commission:
The appellant, a recovery agent for ICICI Bank, claimed that 80% of the commission received should be deductible as expenses under Rule 5(2) of the Service Tax Rules. However, the department contended that the appellant did not meet the conditions to be considered a pure agent. The Tribunal analyzed the agreement between the appellant and ICICI Bank and found that it did not establish that the appellant was acting on behalf of the bank. The agreement did not specify that payments were made on behalf of the service recipient, and this information was not reflected in the invoices. The Tribunal concluded that the appellant failed to satisfy the conditions for excluding 80% of the commission from service tax payment.

Time-Barred Demand for Service Tax:
The appellant argued that the demand for service tax was time-barred since they had consistently reflected in their ST 3 returns that service tax was paid only on 20% of the commission. They had also sought clarification from the jurisdictional Commissioner regarding the deduction of 80% towards expenses. The Tribunal noted that the appellant's returns clearly indicated their position as a pure agent and that they had corresponded with the authorities seeking clarification. The Tribunal found the department unjustified in invoking the extended period of limitation under section 73 for demanding service tax. Consequently, the Tribunal held that the show cause notice issued in 2011 for the period 2006-07 to 2008-09 was time-barred, and the demand for service tax was set aside.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant was not entitled to exclude 80% of the commission from service tax payment and that the demand for service tax was time-barred. The decision was pronounced in open court on 04.08.2017.

---