2019 (6) TMI 273 - AT - Service Tax

Appeal granted: Service tax demand set aside, penalties upheld.

The Tribunal partially allowed the appeal, setting aside the demand for service tax for the period 01.07.2003 to 09.04.2004 on commission received by the ... Taxability of commission agents - Business Auxiliary Services - commission received for acting as the franchisee and selling their products, HESL - Exemption on agricultural produce - Commission related to agricultural produce - N/N. 13/2003-ST dated 20.06.2003 until 09.04.2004 - HELD THAT:- We find that the demand was raised on the commission received by the appellant under the head of Business Auxiliary Services which was exempted from 01.07.2003 vide notification 13/2003-ST dated 20.06.2003 until 09.04.2004 when this exemption was confined to exemption on agricultural produce only. This period also covers the disputed amount of ₹ 7,11,711/- which according to the assessee was a reimbursable expense and not so according to the department. Accordingly, the demand for the period 01.07.2003 to 09.04.2004 is set aside with consequential relief. As far as the request for setting aside of penalties u/s 76 and 78 is concerned, we do not find that the assessee has made any strong case as to why the penalties need to be waived u/s 80. Appeal allowed in part. Issues:Taxability of commission received by appellant as Business Auxiliary Services, applicability of exemption notification 13/2003-ST, waiver of penalties under section 80 of the Finance Act, 1994.Analysis:The appeal in this case was filed against Order-in-Appeal No. 04/2009 (V-II) ST dated 25.02.2009 concerning the taxability of commission received by the appellant as Business Auxiliary Services. The appellant acted as a franchisee of M/s Huttchison Essar South Ltd., and received commission for selling their products. The department sought to tax this commission as Business Auxiliary Services, leading to a demand for service tax for the period July, 2003 to January, 2005. The appellant argued that a portion of the gross value, specifically an amount of &8377; 7,11,711/-, was a reimbursable expense incurred towards interior decoration and other items procured for HESL. The lower authority confirmed the demand and imposed a penalty.Upon appeal before the Commissioner (Appeals), the matter was remanded to the adjudicating authority to reconsider the arguments and rework the tax and penalties. However, the lower authority, in the denovo adjudication, rejected the appellant's contention that the amounts received prior to the demand period could be set off against the demand calculated from July, 2003 onwards. The appellant also raised the argument that the commission received was exempted under notification 13/2003-ST dated 20.06.2003, which exempted business auxiliary services provided by commission agents. The exemption continued until 09.07.2004 when it was limited to commission related to agricultural produce.The Tribunal analyzed the arguments and found that the demand was raised on the commission received by the appellant under Business Auxiliary Services, exempted from 01.07.2003 to 09.04.2004 as per notification 13/2003-ST. Consequently, the demand for the period 01.07.2003 to 09.04.2004 was set aside, providing consequential relief. However, regarding the request to waive penalties under sections 76 and 78, the Tribunal did not find a strong case presented by the appellant for penalty waiver under section 80 of the Finance Act, 1994. Therefore, the appeal was partly allowed by setting aside the demand, interest, and penalties for the specified period, as pronounced in the open court on 04.06.2019.