TaxTMI 
TaxTMI 
2014 (11) TMI 1057
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....her Financial Services (hereinafter referred to as 'BOFS', for brevity), which is leviable with Service Tax (hereinafter referred to also as the 'ST', for brevity), with effect from 16-7-2001 by virtue of Notification No. 4/2001-S.T., dated 9-7-2001. On gathering information and examination of the activities of them (Appellant) that their activities like Bill Discounting, Asset Management, Fund Management, Advisory and other auxiliary financial services amongst others are classifiable under the category of BOFS, they were summoned by the Superintendent of Service Tax, ST Range, Shimoga. They disagreed with the views of the department and refused to register and contested the issue. On further reference also, the appellant failed to register with ST and failed to pay ST and failed to file ST-3 returns. Accordingly, the Lower Authority issued them a show cause notice vide C. No. V/ST/15/113/2012, dated 22-4-2013 [hereinafter referred to as 'First SCN', for brevity], as to why ST amount of Rs. 9,72,865/- (including cesses) should not be demanded for the period from October, 2007 to March, 2012 along with interest thereon besides imposing penalties on them under Sections 76, 77(1)(a), ....
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....to 1-7-2012, the service of discounting bills is covered under negative list. However, the Lower Authority has confirmed an amount of Rs. 1,22,495/- (including cesses) and interest thereon, besides imposing penalty of Rs. 10,000/- under Section 77(2) and also demanded Late fee of Rs. 20,000/- for non-filing of ST-3 returns. Being aggrieved by the Impugned Order, they have filed this Appeal (ST-4 dated 8-7-2014). 3. The Grounds of Appeal, urged in brief, are as follows. That - (1) the Impugned Order is illegal, improper and not in accordance with the provisions of FA. (2) They submit that they would be liable for paying ST on services charges for the period 2011-12 and 2012-13, however, they are still under threshold limit as per Notfn. No. 6/2005-S.T., dated 1-3-2005 and Notfn. No. 33/2012-S.T., dated 20-6-2012 respectively. (3) They submit that for the purpose of computing the exemption limit only the amounts realized should be considered however, in the instant case, the department has gone by the credits in the Profit and Loss Account. If actual receipts are considered for the year 2011-12, the value would be less than Rs. 10 lakhs which would be within threshold limit and....
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..... They have cited Supreme Court case law in support of their contention. (11) The Superintendent of Central Excise, ST Range, Shimoga vide letter dated 10-8-2012 had stated that the commission received by them from mutual fund units are taxable under BOFS and also under Business Auxiliary Service and the Department itself was not sure about the taxability and hence extended period not invokable. (12) No interest and penalties would be payable from them as the principal amount is not taxable and have cited case laws in support. (13) The penalty for non-filing of return is also liable to be set aside as the activity carried on by them is taxable or not was an issue and hence they had not obtained registration and filed ST-3 returns. (14) They also submitted that the Lower Authority has not extended the benefit of cum-tax value as they have not collected any tax from their customers/clients. If the cum-tax value benefit is conferred then the demand would be further reduced. The demand in the Impugned Order is high-pitched and hence liable to be set aside. (15) They contended that they have wrongly paid ST including Cesses and interest of Rs. 23,871/-, as the commission on mutual funds....
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....tenable; (3) the interest and penalties imposed on them are tenable; (4) the commission received by distributors of mutual fund company are in the nature of commission chargeable to ST under BAS or BOFS; and, (5) they (Appellant) are eligible for refund of the ST amount and interest paid thereon; or otherwise. 8.1 I take up the first issue required for determination at '(1)' above - whether or not the Impugned Order has gone beyond the scope of both the SCNs (First SCN and the Second SCN) or otherwise, is taken up. The Lower Authority has alleged that the appellant were providing services such as asset management and fund management. However, as per the records, it is observed that they are carrying on the following activities : (i) Lending to Industrial units and to workers of Industrial units; (ii) Bill Discounting facility; and (iii) Distribution of Mutual Fund Products. Further, there was no allegation regarding commission received on mutual fund units in both the SCNs (First SCN and the Second SCN). As rightly urged by them, the Lower Authority has travelled beyond the scope of both the SCNs (First SCN an....
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...., 8]. (Emphasized). The ratio of the above cases referred squarely applies to the instant case in principle. 9.1 The next issue required for determination at '(2)' above - whether or not the demand is tenable, is taken up. On perusal of their records, it was observed that the major portion of the demand relates to Discounting charges and a small portion of which relates to commission earned on sale of Mutual funds and service charges. The Lower Authority after due consideration of the reply filed by the appellant and citing the Notfn. No. 29/2004-S.T., dated 22-9-2004 had dropped the discounting charges from the demand for the entire period, i.e., 2007-08 to March, 2013. Further, the Lower Authority has included the commission received by the appellant from the Mutual Fund companies in the taxable value and computed the ST liability. In this regard, as per Rule 2(l)(d)(vi) of the STR which was in force upto 30-6-2012 reads as follows : "2(1) In these rules unless the context otherwise requires, - (d) "Person liable for paying the Service Tax" means, - (vi) in relation to business auxiliary service of distribution of mutual....
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....ication No. 13/2003-S.T., the conclusion is irresistible that the respondent were not liable to pay any Service Tax for service rendered as commission agent in connection with sale and purchase of units of mutual fund schemes during the relevant period." However, I find on examination of the record that there is not a semblance of consideration, discussion and finding, with material evidence in support, recorded by the Lower Authority in this regard in the Impugned Order, as was essential - yet the liability has been invoked and confirmed against them, in abstentia, as it were thus (non-discussion of material defence submission). Such casual non-consideration made would fail, as is obvious. It is against the salutary principles of natural justice also ('right to effective representation'). The law in this regard is clear and well settled. It cannot be done. It goes to the root of the issue involved. For illustration, I rely on the decisions in the cases of CCE v. N.M. Nagpal (P.) Ltd. [2008 (222) E.L.T. 486 (S.C.)] and Alpic India v. CCE [2007 (219) E.L.T. 183 (Tri.) = 2009 (15) S.T.R. 114 (T)] in this regard. In the latter case, it was held (Headnotes) as follows - "Order - Sub....
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....129B and 130 of Customs Act, 1962 - Rule 10 of CEGAT (Procedure) Rules, 1982. [paras 2, 8] Appeal - Order - Appellate Authority has all the powers which original authority may have in deciding the question before it subject to statutory restrictions or limitations, if any - Sections 35A and 35C of Central Excise Act, 1944 - Sections 128A and I29B of Customs Act, 1962. They have cited the correct case law in this regard. Even though, they have not taken up this issue before the Lower Authority, this being question of law, nothing bars them from raising the issue during Personal hearing. 11.2 On perusal of the Impugned Order, it is very clear that the Lower Authority has confirmed the demand on commission earned under BOFS. However, the Board's Circular No. 96/7/2007-S.T., dated 23-8-2007 has given clarification on technical issues relating to taxation of services under FA. It has given a cogent and clear cut clarification which reads as follows : "Distributors receive commission from mutual fund for providing services relating to purchase and sale of Mutual Fund units. Services provided by such distributors are in the nature of commission agent and are, thus, liable to Se....