Tribunal confirms taxability of service commission, reduces penalty under Finance Act

The Tribunal confirmed the taxability of the commission received by the appellant for providing services to financial institutions under sub-section 19 of section 65 of the Finance Act. The appellant's delayed registration under the Service Tax regime was noted, leading to the imposition of a penalty. Despite prompt payment of the demanded amount and interest, the penalty was initially set at 100% but later reduced to 15% of the total demand due to the appellant's admission of liability. The order partly allowed the appeal, confirming the tax demand while reducing the penalty imposed on the appellant.

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Issues:
Taxability of commission received by appellant for providing services to financial institutions, registration under Service Tax regime, imposition of penalty.

Analysis:
1. Taxability of Commission:
The appellant worked as a Direct Selling Agent (DSA) for various financial institutions, providing taxable services related to selling loan products and receiving commission. The Department investigated based on data from the Income Tax Department and deemed the received commission taxable under sub-section 19 of section 65 of the Finance Act. A recovery of Rs. 16,97,595 for the period from 01.04.2013 to 31.03.2017 was proposed, leading to the appeal before the Tribunal.

2. Registration under Service Tax Regime:
The appellant claimed unawareness of the Service Tax liability initially and mentioned confusion regarding the nature of services until 01.07.2012. The appellant got registered under the Service Tax regime only in August 2016 upon being informed by the Department. The appellant deposited the entire demanded amount, interest, and penalty within 30 days of the show cause notice issuance. However, the Department argued that the appellant's delayed registration indicated willful abstention from tax liability.

3. Imposition of Penalty:
While the appellant paid the demanded amount and interest promptly, the imposition of a penalty was contested. The Department justified the penalty, citing the appellant's delayed registration despite providing taxable services even before 2010. The penalty was imposed at 100% of the demand, which was confirmed in the order under challenge. However, considering the appellant's admission of liability and the provisions of Section 78 of the Finance Act, the penalty was modified to 15% of the total demand instead of 100%.

In conclusion, the Tribunal observed that the appellant provided taxable services chargeable under the Finance Act and could not claim ignorance of the law. The appellant's payment of the demanded amount without protest did not absolve them from penalty. The order under challenge was partly allowed, confirming the demand but reducing the penalty to 15% of the total amount.

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