TMI Blog2021 (3) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... their books of accounts as commission but in fact it is their TDS amount only - service rendered to the subcontractors or not - HELD THAT:- There is no force whatsoever in the argument of the learned counsel that the amount shown as commission in their books of account is actually tax deducted at source (TDS). Learned counsel tried to convince us that this is TDS amount by saying that the amount shown as commission matches with the amount deducted as TDS from their payment by the Govt Department. These figures match because both are only 2% of the contract value. For instance if ₹ 100/- is the value of the contract, the Govt department pays the appellant ₹ 98/- and deducts ₹ 2/- as TDS. A credit for this ₹ 2/- also comes to the appellant which they can use to set off against their tax liability. In other words, the appellant has got the entire ₹ 100/-. In the second leg of transaction, the appellant is required to pay ₹ 100/- to the sub-contractor to whom he outsourced the work on back to back basis. He did so after deducting 2% as commission and paid only ₹ 98 to the sub-contractor. This ₹ 2 has been reflected in their books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rused the records. The appellant is registered with the service tax department and has been paying service tax. Departmental officers received intelligence that they had been evading service tax in respect of the services rendered by them. After necessary enquiries and investigation, show-cause notice dated 21/10/2010 was issued to them demanding service tax under 3 heads as below :- Sl No Service under which tax was demanded Amount of Service Tax (Rs) Period 1 Repair maintenance of roads 15,44,97,725/- 16.6.2005 to 26.07.2009 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2009 which is squarely covered by the retrospective amendment. In fact, if they had paid service tax they would have been entitled to refund of service tax so paid. Therefore, the demand on this account is not sustainable and needs to be dropped. 5. As far as the third demand is concerned, it is under the Head Business Auxiliary Services . Explaining the nature of their activities he said that they undertake contracts for various Govt agencies for construction of roads, repair of roads, etc. As they are not able to execute all the contracts on their own, they sub-contract some of the works on back to back basis to other contractors without any consideration or margin. On a specific query from the Bench as to why any business would do such a nonprofitable venture, he explains that this helps them to artificially 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter year. Apart from the submissions of the learned counsel for the appellant, there is nothing on record to show that what was collected was not a commission. 8. On the second question of whether the commission so received was chargeable to service tax under business auxiliary service, and if so, under what head, he would submit that the business auxiliary service has been defined in Section 65(19) of Chapter 5 of the Finance Act 1994 as below:- Business Auxiliary Service means any service in relation to, - (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (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 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d we do so. As far as the demand on GTA services is concerned, the appellant has already paid the amount along with interest and is not contesting the same. Therefore, the demand to this extent needs to be upheld and we do so. 10. This leaves us with the third demand on business auxiliary services . This demand has been raised on the amounts said to have been received as commission by the appellant from the sub-contractor. The first contention of the learned counsel for the appellant is that they have not received any commission whatsoever and it is the TDS amount which they have wrongly shown as commission in their books of accounts. We find it hard to agree. In the first place the department s contention that they have received commission is based on their own audited books of accounts which have shown, year after year that they have received 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant period shows that the amounts have been recorded on the income side as commission and there is no corresponding TO TDS on the expenditure side. The net profit has been calculated after subtracting the expenses and depreciation from the income including the commission. This net income has been duly reflected in their income tax returns. Thus we find as a matter of fact that the appellant has received commission of 2% of the contract value in contracts which they have outsourced to their subcontractors. 11. The next question is whether the commission so received is chargeable to service tax under the Head Business Auxiliary Services as per the definition indicated in para 8 above. Learned A.R. argues that the appellant is promoting and marketing the services of the sub-contractor and therefore the sub-contractor is the client and the appellant is the service provider and is providing business auxiliary services. Therefore, the service tax is chargeable on the commission amount. From the nature of transactions discussed above, we do not find that the appellant is in the business of or is engaged in promoting or marketing the service of the subcontractor. He is merely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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