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Lalit Dongre, Kishore V. Ahire, Ravindra L. Ahirrao, Roshan Kote, Vaishali Ahire Versus Commissioner of Central Excise, Nashik

2015 (9) TMI 788 - CESTAT MUMBAI

Imposition of penalty - Business Auxiliary Services - Whether the appellants are covered under the category of Business Auxiliary Services by virtue of being distributors and appointing further distributors for the sale of goods of M/s. RMP and getting paid a commission for the sale effected to chain of distributors below them - Held that:- There cannot be any dispute that the appellants are in receipt of commission/facilitation for the sales which were derived on the basis of purchase made by t .....

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i Surendra Singh Rathore and Smt Chanda Bohra upheld the penalties imposed on the appellant therein on an identical case. We do not find any reason to deviate from such a view taken by the Tribunal. - Decided against assessee. - Application No. ST/S/92920 to 92924/14, Appeal No.ST/85409 to 85413/14 - Final Order Nos. A/2392-2396/2015-WZB/STB - Dated:- 7-8-2015 - M V Ravindran, Member (J) And Raju, Member (T), JJ. For the Petitioner : Shri Badrinarayan & Shri Ashish Philip, Advs For the Respo .....

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;s packages and canvas for enrolment of new members to create a chain of distributors who are as per agreement under compulsion to buy products from shopping section of M/s RMP every month; M/s RMP issues payment advice to each distributors indicating therein commission payable to the distributors. It is the case of the Revenue that appellants are not independent traders but commission agents of M/s. RMP and hence they are liable to pay service tax on the amount of commission received. As they a .....

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h an order, appellants preferred appeals before the first appellate authority. The first appellate authority after granting personal hearing to the appellants rejected the appeals. 3. Learned Counsel appearing on behalf of appellants would draw our attention to the facts of the case as also the agreement entered by appellants with M/s. RMP. It is his submission that appellants cannot be considered as commission agents as it does not place on record any evidence to show that M/s RMP is providing .....

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s commission to the appellants and submits that appointment of subsequent distributors by the distributor appointed by the appellants has no bearing on the functioning of the appellants. He would submit that definition of Business Auxiliary Service is not covering the arrangement like the one which is in this case. He would submit that the Budget Changes of 2010-11 it brought into service tax net the multilevel marketing system hence these activities are to be covered after 2011, which is an ind .....

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uish the cases, it is his submission that in the cases in hand M/s RMP are direct selling marketing company of various entities like Tata-AIG, Reliance Infocom and Whirlpool etc. The business transactions between appellants and M/s RMP are in respect of purchase of goods for further sale which cannot be covered under the category of business auxiliary services. He would extensively submit that the Judgements of the Tribunal in the cases as cited above are distinguishable on the facts. It is his .....

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e appellants and further distribution by those distributors have to purchase goods from M/s RMP worth of ₹ 10,000/- for which commission is paid. He submits that the issue is squarely covered by the decision in the case of Shri Surendra Singh Rathore and Smt. Chanda Bohra (supra) and reads the said decision. 5. We have considered the submissions made by both sides and perused the records. 6. The issue to be decided in this case is whether the appellants are covered under the category of Bu .....

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ts and M/s RMP in this case it indicates that the appellants are required to appoint only two distributors they are suppose to increase these two to further appoint of 2 distributors and by such sub-distributors (if they could be called so). The appellants and the chain of distributors appointed by them are under compulsion to purchase other goods worth ₹ 10,000/- from M/s. RMP. Appellants herein are getting paid an amount as commission from goods which were purchased by the distributors a .....

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his juncture we have to hold that the issue involved in this case is now squarely covered by the Judgement of this Tribunal in the case of Shri Surendra Singh Rathore and Smt. Chandra Bohra (supra). We reproduce the relevant paragraphs which are as under:- "4. The agreement between the appellants and FSL was for the purpose of selling the company's product as per the RCM Business Marketing Plan (RCM stands for Right Concept Marketing Plan). According to terms and conditions of the agree .....

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h in which he desires to have the commission credited in his account. Company is obligated to remit consideration to the distributor for selling the company's product as per terms of conditions specified in the "RCM Business Marketing Plan" of the company. Particulars of the RCM Business Marketing Plan have been set out in the adjudication order. As per this plan a distributor gets commission on the supply made by FSL and also a share in the commission for introducing new customers .....

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d by the appellants as a consequence of the "RCM Business Marketing Scheme" in relation to discounts offered, constitutes consideration paid by the service receiver FSL to the service provider/appellants. 6. Shri Sarwal Ld. Counsel for the appellants submitted that the "RCM Business Marketing Plan" is a Multilevel Marketing Scheme and in this scheme the first distributor 'A' approaches FSL and purchases their products of certain minimum value. 'A' recommends F .....

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t in respect of purchases made by subsequent distributors 'C' 'D' and 'E' does not amount to commissions for promotion or marketing activities permitted by the petitioner but is dividend paid to 'A' for his efforts for introducing the scheme to new introducees who also become distributors of FSL. 7. On analysis of the terms and conditions of similar agreements between the FSL and the petitioners, the adjudicating authority confirmed the tax liability against the a .....

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