TMI Blog2015 (6) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission earned by a Distributor from Amway based on his own volume of purchase from Amway and the commission earned by him on the basis of the volume of purchases of Amway products made by his sales group i.e. group of second level of Distributors appointed by Amway on being sponsored by the Distributor. - Matter remanded back. Whether duty exemption under notification no.5/2006-ST would be admissible to the Distributors in this group of cases - distributors are engaged in promoting sales/marketing of the products of Amway and they are not marketing or promoting any taxable service which is branded and the brand name belongs to another person. Marketing or sale promotion of branded products by a person/ commission agent does not amount to providing branded service by him and hence, marketing or sales promotion of a branded product does not come under the exclusion category as mentioned in the proviso to notification no.6/05-ST. In this group of cases, the eligibility of the Distributors (assessees) for the exemption notification no.6/2005-ST has not been examined and for this purpose also, these matters have to be remanded to the Original Adjudicating Authority. When there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence between the sale price not exceeding the MRP and the purchase price (DAP) is the Distributors profit margin. Besides this, as per the marketing policy of Amway, a distributor is entitled to commission based on the monthly volume of purchases made by him from Amway for direct sale to the consumers or for personal consumption. This commission is linked to the volume of purchases made by a Distributor from Amway in a month. The distributors appointed by Amway can also sponsor/enroll other persons for marketing of the Amway products. These second level Distributors enrolled through a particular Distributor can directly purchase the products from Amway for selling the same. Based on the volume of the Amway products purchased by such second level distributors, the Distributors through whom they are enrolled, are paid commission and other incentives by Amway. This commission is also paid on monthly basis. Thus, under the direct selling/multi-level marketing concept of Amway, a distributor earns monthly income in three ways (a) by directly selling the Amway products purchased from Amway and the difference between his purchase price (DAP) and the sale price is his profit margin; (b)com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. ST/257/2011 Waraich Mktg. 01.07.2003 to 31.03.2006 11.07.2007 11,40,888/- 9. ST/259/2011 Sandhu Mktg. 01.07.2003 to 31.03.2009 11.07.2007 5,55,915/- 10. ST/433/2011 Rashmi Panchnanda 01.07.2003 to 31.03.2008 17.04.2009 9,55,023/- 11. ST/473/2011 Manjeet Kaur Ors. 01.07.2003 to 31.03.2005 11.09.2008 15,773/- 12. ST/502/2011 Shuddhatm Bharil 01.07.2003 to 31.03.2008 24.10.2008 18,69,606/- 13. ST/580/2011 Atul Sondhi 01.04.2006 to 31.03.2008 09.01.2009 3,06,391/- 14. ST/1123/2011 Paramjeet Kaur Amol 01.07.2003 to 31.03.2006 25.09.2009 1,08,052/- 15. ST/1383/2011 Rajveer Singh 01.04.2004 to 31.03.2008 13.04.2009 6,97,800/- 16. ST/1781/2011 Shekhar Chaudhary 2006-07 and 2007-08 19.03.2009 3,75,546/- 17. ST/1802/2011 Nitesh Dixit 01.07.2004 to 31.07.2008 16.10.2008 6,63,113/- 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Prasad 2006-07 to 2009-10 13.09.2010 ₹ 3,08,810/- 3. The above show cause notices were adjudicated by the Original Adjudicating Authority by separate orders by which the service tax demands as made in the show cause notices were confirmed along with interest thereon under Section 11 AB and besides this, penalties were imposed under Section 76,77 and 78 of the Finance Act, 1994. 4. On appeals being filed to the Commissioner (Appeals) against these orders, while the appeals filed by Mr.Charanjeet Singh Khanuja, Mr. Biju John, Shri Varinder Dhiman, Shri Ashok Kumar Arora, Shri Pradeep Kumar, Shri Sarabjit Singh, Shri Manjit Pal Singh, M/s.Waraich Marketing, M/s. Sandhu Marketing, Ms. Rashmi Pachnanda, Smt. Manjit Kaur, Shri Shuddhatm Prakash Bharill, Shri Atul Sondhi, Smt. Paramjit Kaur Amole, Shri Rajveer Singh, Shri Shekhar Choudhary, Shri Nitesh Dixit, Mt. Paramjit Kaur Amole, Ms. Ritu Rastogi, Ms. Kavita Sukhija and Smt.Sangeet, Shri Deepak Batish, Shri Sanjiv Gandhi and Shri Ranjan Sachdev were dismissed, against which the present appeals have been filed, the appeals filed by Shri Ajit Singh, Pramila Singh, Sneh Lata, Sunita Singh, Shri Krishna Murari, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice to Amway or not, no service tax can be charged from them on the amount of commission received by them during the period prior to 1.5.2006. (4) Even if the activity of the Distributors in this group of cases is treated as taxable under Section 65(105)(zzb) read with Section 65(19)(i) of the Finance Act, 1994, each of them would be eligible for small service providers exemption under exemption notification no.6/2005-ST dated 1.3.2005. This plea had been specifically made before the lower authorities but the same was not accepted. (5) In any case, longer limitation period under proviso to Section 73(I) of Finance Act, 1994 is not invokable, as there was no wilful mis-statement, suppression of facts or contravention of the provisions of Finance Act, 1994 or of the Rules made thereunder with intent to evade payment of service tax on the part of the assessees. For the same reasons, there is no justification for imposition of penalty on the assessees under Section 76, 77 and 78 of the Finance Act, 1994. 7. Shri Gobind Dixit, ld. Departmental Representative, defended the findings of impugned orders of the Commissioner (Appeals) in respect of appeal nos. ST/138 and 139/2009, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pleaded that since they were providing the service of marketing or sales promotion of branded products, they would not be eligible for this exemption. Shri Dixit accordingly pleaded that in respect of appeal nos. ST/138 and 139/2009, ST/406/2010, ST/522 to 525, 257,259, 433,473,502,580,1123,1383,1781 1802/2011, ST/56, 86, 126, 645/2012 and ST/1723-1724, 2337 and 2810/2012, there is no infirmity in the orders passed by the Commissioner (Appeals) and in respect of appeals nos. ST/851 to 854, 863, 864, 865, 866, 867, 868, 869, 870 and 878/2012 filed by the Revenue, the impugned orders passed by the Commissioner (Appeals) are not correct. 8. We have considered the submissions from both the sides and perused the records. 9. The appellants in the appeals ST/138 and 139/2009, ST/406/2010, ST/522 to 525, 257, 259, 433,473,502,580,1123,1383,1781 1802/2011, ST/56, 86, 126, 645/2012 and ST/1723-1724, 2337 and 2810/2012 and the respondents in the appeals nos. ST/851 to 854, 863, 864, 865, 866, 867, 868, 869, 870 and 878/2012 filed by the Revenue are distributors of Amway India Enterprises Pvt. Ltd. Amway operate their business of selling of their products under a Business Plan call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of goods produced or provided by or belonging to the client; or (ii) Promotion or marketing of service provided by the client; or [Explanation For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, service in relation to promotion or marketing of service provided by the clientincludes any service provided in relation to promotion or marketing of games of chance, organized, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo;] (iii) Any customer care service provided on behalf of the client; or (iv) Procurement of goods or services, which are inputs for the client; or x x x x x x x x x x x x x x x x x x x x x x x x 12. According to the Department, the activity of the assessees is promotion or marketing or sale of the goods produced or provided by or belonging to the client.In our view, the activity which is covered under Section 19(i) is in relation to the promotion or marketing or sale of the goods produced by the client or provided by the client or belonging to the client. This expression, in our view, would not cover the sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Amway on the products purchased by his sales group. However, in the impugned orders service tax has been demanded on the gross amount of commission and no distinction has been made between the commission earned by a Distributor from Amway based on his own volume of purchase from Amway and the commission earned by him on the basis of the volume of purchases of Amway products made by his sales group i.e. group of second level of Distributors appointed by Amway on being sponsored by the Distributor. For quantifying the service tax demand on the commission received from Amway on the volume of purchase made by the distributors sponsored /enrolled by a particular distributor i.e. the Distributors sales group, these matters would have to be remanded to the Original Adjudicating Authority. 14. Another objection raised by the appellants in appeals nos. ST/138 and 139/2009, ST/406/2010, ST/522 to 525/2010, ST/257,259, 433,473,502,580,1123,1383,1781 1802/2011, ST/56, 86, 126, 645/2012 and ST/1723-1724, 2337 and 2810/2012 and the respondents in appeals nos. ST/851 to 854, 863, 864, 865, 866, 867, 868, 869, 870 and 878/2012 is that the assesses are individuals and during the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misstatement of facts or deliberate contravention of the provisions of the Finance Act, 1994 or of the Rules made thereunder with intent to evade payment of service tax. The Departments contention, on the other hand, is that the assesses neither obtained service tax registration nor did they declare their activities to the jurisdictional service tax authorities nor did they file ST-3 Return and, therefore, they are guilty of suppression of relevant facts and deliberate violation of the provisions of Finance Act, 1994 and of the Rules made thereunder with intent to evade payment of tax. On considering the rival submissions on this point, we are of the view merely because the assesses did not apply for Service Tax Registration or did not file ST-3 Returns or did not declare their activities to the jurisdictional central excise authorities, it cannot be inferred that this was a wilful act with intent to evade payment of service tax. We also take notice of the fact that in respect of appeals filed by the Revenue, the Commissioner (Appeals) after analyzing the activities of the assesses had taken the view that the same is not covered by the definition of Business Auxiliary Serviceunder ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
