2018 (9) TMI 1448 - AT - Service Tax

Tribunal upholds Service Tax on distribution agent for Amway India Enterprises under Business Auxiliary Services

The Tribunal confirmed the Service Tax and penalty imposition against the appellant for acting as a distribution agent for M/s. Amway India Enterprises ... Business Auxiliary Services - appellant acting as distribution agent of M/s. Amway India Enterprises in terms of the agreement entered between the two - Held that:- Tribunal in the case of Charanjeet Singh Khanuja v. C.S.T., Indore/Lucknow/Jaipur/Ludhiana [2015 (6) TMI 585 - CESTAT NEW DELHI], has dealt with an identical question and has held that the activity would fall under the category of ‘Business Auxiliary Services’ - the appellant was liable to pay Service Tax on the commission earned by him for acting as distributing agent of M/s. Amway. Extended period of limitation - penalty - Held that:- Following the decision of Charanjeet Singh Khanuja, extended period as well as penalty is not imposable. Matter remanded to the original adjudicating authority for re-quantification of the tax amount, for the period falling within the limitation and on the commission earned by the distributor - appeal allowed by way of remand. Issues:1. Confirmation of Service Tax and penalty imposition against the appellant for acting as a distribution agent.2. Interpretation of the category of 'Business Auxiliary Services' for taxation purposes.3. Applicability of the longer period for raising demands and imposing penalties by the Revenue Department.4. Decision on remanding the matter to the original adjudicating authority for re-quantification of tax amount and penalty imposition.Analysis:1. The judgment deals with the confirmation of Service Tax and penalty imposition against the appellant for acting as a distribution agent for M/s. Amway India Enterprises. The Tribunal confirmed the demand raised against the appellant for providing taxable services falling under 'Business Auxiliary Services' category, based on the agreement between the appellant and M/s. Amway.2. The Tribunal referred to a precedent decision in the case of Charanjeet Singh Khanuja, where it was held that the activity of acting as a distribution agent falls under 'Business Auxiliary Services'. However, the Tribunal clarified that Service Tax is payable only on the commission received by the appellant. The Tribunal also emphasized that the longer period for raising demands and penalties is not applicable in cases where there is doubt in the field.3. The Tribunal, following the decision in Charanjeet Singh Khanuja case, held that the appellant is liable to pay Service Tax on the commission earned as a distributing agent. However, the demand raised by invoking the longer period was deemed not sustainable. Therefore, the Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for re-quantification of the tax amount within the limitation period and based on the commission earned by the distributor.4. In conclusion, the Tribunal ruled that the penalty is not imposable on the appellant due to the non-applicability of the longer period for raising demands and penalties. The impugned order was set aside, and the matter was remanded for re-quantification of the tax amount within the limitation period. The appeal was disposed of with the decision to set aside the penalty imposition.