Tribunal Upholds Service Tax Demand for Direct Selling Agent Services

The Tribunal dismissed the appeals against the demand of service tax for direct selling agent services provided to ICICI Bank. The appellant's arguments regarding the non-taxability of commission received and the inclusion of subvention in taxable value were rejected. The Tribunal held that the commission paid for promoting financial products was subject to service tax, and there was no genuine doubt about the taxability of the services provided. The invocation of the extended period of limitation was also dismissed, affirming the clarity of the tax liability. The decision was pronounced on 18th October 2018.

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Issues:
Appeal against demand of service tax for direct selling agent services provided to ICICI Bank, valuation of service tax based on commission received, inclusion of subvention in taxable value, invocation of extended period of limitation.

Analysis:

1. Demand of Service Tax:
The appeals were filed against the order confirming the demand of service tax for direct selling agent services provided to ICICI Bank. The appellant argued that they identified customers for car loans from the bank and received commission, which they believed should not be taxed. However, they admitted that a previous decision had settled the taxability issue against them. The appellant contended that they were under a genuine belief that the services were not taxable due to confusion at the time. The Tribunal noted that the appellant did not contest the demand on merit but disputed the valuation, specifically arguing that service tax should only be charged on the net amount received after deducting subvention.

2. Valuation and Inclusion of Subvention:
The appellant argued that the amount received from the bank should be taxed only after deducting the subvention offered to customers. However, the Tribunal referred to previous decisions and held that the commission paid by the bank for promoting financial products was subject to service tax. The Tribunal emphasized that the appellant had the opportunity to clarify discrepancies with the bank but failed to do so. Therefore, the tax should be calculated based on the commission declared by the bank, irrespective of any direct payments to customers.

3. Extended Period of Limitation:
Regarding the invocation of the extended period of limitation, it was found that one of the appellants was not registered with the Service Tax Department and did not file returns. The Tribunal stated that the definition of Business Auxiliary Services clearly includes promotion or marketing services, leaving no room for doubt. As there was no genuine doubt about the taxability of the services provided by the appellant, the argument on limitation was dismissed.

4. Conclusion:
Ultimately, the appeals were dismissed by the Tribunal. The decision was pronounced on 18th October 2018, upholding the demand for service tax on the commission received for direct selling agent services provided to ICICI Bank. The Tribunal rejected the appellant's arguments on valuation and limitation, emphasizing the clarity of the taxability of the services provided.

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