Commission under multi-level marketing taxable only for sponsored group purchases; gross demand required re-quantification and remand.

Commission earned by Amway distributors under a multi-level marketing arrangement was analysed by distinguishing commission on the distributor's own purchases from commission on purchases made by the sponsored sales group. Only the latter was treated as consideration for taxable sales promotion under Business Auxiliary Service. Because the demand had been raised on gross commission without making that distinction, the matter required fresh verification and re-quantification by the adjudicating authority. The same reasoning also meant the longer limitation period was not invokable on the facts considered. The impugned order was set aside and the matter remanded for fresh adjudication in line with the earlier Tribunal precedent.

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Issues: Whether the commission received by distributors of Amway products was liable to service tax in the manner demanded in the impugned order, and whether the matter required remand for fresh adjudication in light of the earlier Tribunal ruling.

Analysis: The dispute turned on the character of the commission received by the distributors under the multi-level marketing arrangement. The Tribunal followed its earlier decision in the Amway distributors' matter, which had distinguished between commission linked to the distributor's own purchases and commission linked to the purchases of the sponsored sales group. Only the latter was treated as consideration for taxable sales promotion under Business Auxiliary Service. The earlier ruling had also held that the demand had been raised on the gross commission without making the necessary distinction, and that re-quantification and verification were required by the adjudicating authority. On limitation, the Tribunal relied on the same line of reasoning and noted that the longer limitation period was not invokable in the facts considered.

Conclusion: The impugned order was set aside and the matter was remanded to the adjudicating authority for fresh adjudication in accordance with the earlier precedent.

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