Service tax on distributor commission depends on bifurcating taxable and non-taxable components before fresh adjudication.

Commission paid to Amway India distributors was not taxable in full because the Tribunal distinguished between commission attributable to a distributor's own purchase volume and commission linked to the performance of the sponsored sales group. The former was treated as outside business auxiliary service, while the latter could attract service tax as sales promotion service. As the adjudicating order applied tax to the gross commission without separating taxable from non-taxable components, it was set aside and the matter was remanded for fresh quantification and adjudication in line with the earlier Tribunal ruling.

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Issues: Whether the commission received by distributors of Amway India Enterprise Pvt. Ltd. was chargeable to service tax in full, and whether the matter required remand for fresh quantification and adjudication.

Analysis: The distributors were similarly placed to those considered in the earlier Tribunal decision, which held that commission relatable to a distributor's own purchase volume did not amount to consideration for business auxiliary service, while commission linked to the performance of the sponsored sales group could be taxable as sales promotion service. The impugned order had proceeded on the gross commission without separating the taxable and non-taxable components. The Tribunal therefore followed the earlier ruling and held that the demand could not be sustained without such bifurcation and fresh examination by the adjudicating authority.

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

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