TaxTMI 
TaxTMI 
2021 (3) TMI 209
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....009 2. Business auxiliary services 15,13,673/- April 2005 to March 2010 3. Goods Transport Agency Services 2,47,873/- January 2005 to July 2009 During investigation itself, the appellant paid an amount of Rs. 2,47,873/- towards GTA services indicated above along with interest. The show-cause notice proposed to appropriate the aforesaid amount and adjust against the demand. It further demanded interest on the above three amounts. It was also proposed to impose penalty upon them under Section 76 of the Finance Act 1994 for failure to pay service tax as above by the due date and penalty under Section 77 for not registering in respect of maintenance and repair services, business auxiliary services and GTA services and not filing ST-3 returns. It was further proposed to impose a penalty on them under Section 78 of the Finance Act 1994 for non-payment of service tax by reason of suppression of facts and contravention of the provisions of the Act and Rules with an intent to evade payment of service tax. 3. After following due process, learned Commissioner passed the impugned order-in-original confirming the demands and interest and imposing penalties as proposed. He appropriated....
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....icially increase their turnover and to maintain "contractor status" so as to be eligible for future tenders. In such cases, the contracting Govt agency pays them the amount and in turn, they pay the full amount to the sub-contractor. The Govt department deducts 2% from their bills as income tax deduction at source and pays them only 98%. They, in turn, pay only 98% to the sub-contractors and not 100%. The differential 2% of the amount has been shown as commission in their books of accounts. It is the case of the Revenue that they have received 2% commission from their sub-contractors for promoting and marketing the services of the sub-contractors and therefore the same is chargeable to service tax under the head "Business Auxiliary Services". Learned counsel contests this demand on two grounds. Firstly he would argue that the amount in question was wrongly shown in their books of accounts as commission but in fact it is their TDS amount only. As no commission has been received by them from their subcontractors, no service tax can be levied on them. Secondly, he would argue that they are not rendering any service whatsoever to the subcontractors. In fact they are only transferring p....
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.... client; or (v) production or processing of goods for, or on behalf of the client; or (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activity that amounts to "manufacture" of excisable goods. Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause, - (a) "Commission Agent" person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person - means any (i) deals with goods or services or documents of title to such goods or services; or (ii) collects payment of sale price of such goods or services; or (iii) guarantees for collection or payment for such goods or services; or ....
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....eived commissions. There is nothing on record to show that they have not received commissions. Learned counsel argues that these amounts match with the TDS amounts deducted from their bills by the Govt department. Tax deduction at source is an amount deducted by the person paying the amount. The amount so deducted is paid by the deductor to the income tax department and a credit for that amount goes to the payee. The amounts so deducted get set off against the tax liability of the payee and if deducted in excess, the amounts are refunded by the income tax department. In these cases, the payee is the appellant and the client Govt department has deducted 2% as TDS as per the rules and paid them 98%. In other words the appellant got 98% of the payment in cash and 2% as a credit of the tax deducted on their behalf. The transactions between the appellant and the sub-contractor is a separate leg of transaction. If any tax was to be deducted from the sub-contractors payment, it should have been done by the appellant and that amount should have been paid to the income tax department and a credit of such payment would have accrued to the sub-contractor which they could have set off against ....