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Shri Partho Bose, Ms Neelam Srivastava Versus Commissioner of Central Excise, Lucknow

Multi Level Marketing - Business Auxiliary Services - Demand of service tax on commission earned from activity of sponsoring new distributors and commission earned on turnover achieved by them - Held that:- service tax is not payable on the Trade discount earned and profit on Trading in Amway goods. But the same is taxable on the commission earned from activity of sponsoring new distributors and commission earned on turnover achieved by them and accordingly remanded with direction to recalculate .....

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siness associates of Amway India Enterprises Pvt. Ltd. (Amway for short), as business associates of Amway they earned both discount and commission. The appellants are in appeal against order-in-appeal passed by the Commissioner (Appeals), wherein the demand of service tax is confirmed both on the discount and commission. 2. The learned Counsel informed that in the case of similar situated assesses, vide final order No. 51818-51855 dated 9/6/2015 passed by coordinate Bench of this Tribunal at Del .....

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rately delayed, may be condoned for the interest of justice and a similar order of remand may be passed in this appeal. Learned AR for Revenue relies on the impugned order. 4. Having considered the rival contentions, we condone the delay of 35 days in respect of both the appellants - assesses for the interest of justice, but impose a cost of ₹ 2,000/- (Rupees Two Thousand) each on the appellants, payable within six weeks in 'Prime Minister's Relief Fund' and compliance of the s .....

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w, 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 the goods by a person, which belong to him, as the activity of the promotion or marketing or sale of the goods by a person belonging to him would not constitute service. The assessees in these cases are distributors, who purchase the goods from A .....

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se 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 Amway during a month can not 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 g .....

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for sale of the Amway products/marketing of the Amway products and who on being sponsored by that Distributor are appointed by Amway as second level of distributors is, in our view, the activity of marketing or sale of the goods belonging to Amway and the commission received by the Distributor from Amway, which is linked to the performance of his sales group (group of the second level of distributors appointed on being sponsored by the Distributor) would have to be treated as consideration for .....

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me 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 .....

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ce and the individual persons cannot be treated as Business concern. We do not accept this plea as a business concern can be a proprietary firm also which is owned by an individual 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 treated as business or commercial concern. Therefore, notwithstanding the fact that w.e.f. 1.5.2006 the term, commercial concern in Section 65(105)(zzb) was r .....

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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 the distributors are engaged in promoting sales/marketing of the products of Amway and they are not marketing or promoting any taxable .....

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nd for this purpose also, these matters have to be remanded to the Original Adjudicating Authority. 16. Another plea raised in these appeals is regarding limitation. It is the contention of the assesses that there was absolutely, no suppression or 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 obtain .....

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