TaxTMI 
TaxTMI 
2026 (7) TMI 452
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....y the AMWAY have to be sold through independent distributors known as Amway Business Owners (ABO). Once an existing distributor sponsor another person to Amway to enroll him as a distributor, who would become an independent business owner of his own business and the existing distributor does not promote, market or sell the Amway product to such a new distributor. Alleging that such activities carried out by the appellants are falling under the category of Business Auxiliary Services, proceedings were initiated and show-cause notice dated 01.03.2011 was issued proposing to demand service tax along with interest and penalty. 2.1 On adjudication, the adjudication authority as per the Order-in-Original dated 07.02.2012 confirmed the demand and also imposed penalties. Aggrieved by the said order, an appeal was filed before the learned Commissioner (Appeal). The learned Commissioner (Appeal) as per the impugned order dated 25.05.2016 partially modified the order by setting aside the penalty under Section 76 subject to payment of penalty under Section 78 of Finance Act. Aggrieved by the said order, Appeal No.ST/21370/2016 is filed. Similarly, in Appeal No.ST/21371/2016, a show-cause no....
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....esides selling the Amway products purchased Amway, they also promote the marketing of the Amway products. As per the Amway Business Plan, a distributor has three streams of income (a) a distributor of Amway products purchases the products from Amway at the Distributions Acquisition Price (DAI) and sells them in retail at the price not exceeding the MRP as fixed by the Amway. The difference between the retail sale price and the DAP is the Distributors profit margin. (b) Besides above, the Distributor also gets a commission from Amway from 6% to 21% depending upon the purchases of Amway products during the month for sale or for personal consumption. Thus, depending upon the purchases made by the distributor during a month from Amway, he gets a commission/bonus varying from 6% to 21%.. This is the second stream of income of the distributor; (c) A Distributor also gets monthly commission on the basis of the success and productivity as defined by the products sales of the distributors appointed through him which constitute his sales group. 10. In these cases, the service tax has been demanded on the gross amount of commission received by each of the Distributors (assessees) of ....
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....ing MRP fixed by the Anway. This activity of the Distributors, in our view, cannot be treated as promotion, marketing or sale of the goods produced or provided by or belonging to the client (Amway), as the sale of the goods purchased by the Distributors front Amway is not the sale of the goods belonging to their client Amway. Once the Amway products have been purchased by a Distributor from Amway, those products cease to belong to Amway, but belong to the Distributor and sale of these goods by the Distributor would not constitute service to Amway. For the same reason, any incentive or commission received by a Distributor from Amway for buying. certain quantum of goods from Anway during a month cannot be treated as the consideration received for promotion or marketing or sale of the goods produced by or provided by or belonging to the client, more so, as this commission is not linked to the goods sold by the Distributor, but is linked to the goods purchased by the Distributor from Amway during a month and is in the nature of volume discount. Therefore, no service tax is chargeable on the profit earned by the distributors from sale of the goods in retail which had been purchased by t....
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....al and there is no difference between proprietary firm owned by a person and that person. When an individual engages himself in a commercial activity, he has to be business Therefore, notwithstanding the fact that w.e.f. 1.5.2006 the term, treated as or commercial concern. 'commercial concern in Section 65(105) (zzb) was replaced by any person, we are of the view that even during the period prior to 1.5:2006, the Business Auxiliary Service, even if provided by an individual to a client, was taxable. Moreover, in this group of appeals, the Appellants in Appeal No.ST/257/2011 and ST/259/2011 are proprietary firms who, without any doubt, are commercial concerns. 15. Another point of dispute is as to whether duty exemption under notification No.5/2006-ST would be admissible to the Distributors in this group of cases. In this regard, the Departments plea is that this exemption is not applicable when the taxable service is provided by a person under a brand name/trade name, whether registered or not, of another person and in this group of cases, the Distributors have promoted the sale/marketing of branded products. This plea of the Department is not correct, as in these cases th....