TMI Blog2023 (9) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... le on record to indicate that what type of commission mentioned above was received by the Appellant in this case. No investigation was carried out with the Appellant to ascertain the nature of service rendered by them to M/s.SSOMPL and whether the amount received was towards rendering of any taxable service or not. In the impugned order Service tax has been demanded on the gross amount of commission received by the Appellant and no distinction has been made between the commission earned by a Distributor from M/s SSOMPL based on his/her own volume of purchase and the commission earned by him/her on the basis of the volume of purchases of M/s SSOMPL products made by his/her sales group. As no investigation was conducted with the Appellant to ascertain whether the Appellant has rendered any taxable service as defined under, section 65B(44) of the Finance ACT, 1994, the demand confirmed in the impugned order merely on the basis of the data received from M/s.SSOMPL alone is not sustainable. Whether in the facts and circumstances of the case, extended period invocable or not? Consequently, penalty under Section 78 of the Finance Act, 1994 is imposable or not? - HELD THAT:- In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cilitating their sales to down the line agents as well as actual consumers, on commission basis. On 13.08.2018, officers of DGSTI, Ghaziabad searched the premises of M/s SSOMPL on the basis of an intelligence that they have evaded payment of service tax. During the course of search, the officers resumed a file containing DSA details having commission more than 10 lakhs. 2. On the basis of the data recovered from M/s SSOMPL, a Show Cause Notice dated 23.10.2019 was issued to the Appellant demanding service tax of Rs.13,68,147/- for the period April 2014 to June 2017. In the Notice, it was alleged that the Appellant has provided taxable service as provided under Clause (44) of Section 65B of the Finance Act, 1994, but not paid service tax. It was alleged that the activity of promoting and marketing the products of M/s SSOMPL by the DSA for which they were getting commission from M/s SSOMPL, was a taxable service as defined under Section 65B(44). As the service provided by the Appellant to M/s SSOMPL is neither figuring in the services specified in the Negative List as specified under section 66D of the Finance Act, 1994 nor there is any exemption to the same under any Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adu Housing Board Vs CCE reported in 1994(74)ELT.9(S.C) (ii) CCE Vs Bajaj Auto Ltd. reported in 2010(260)ELT17(SC) (iii) Padmini Products Vs CCE reported in 1989(43)ELT195(SC) (iv) Pushpam Pharmaceuticals Company Vs CCE reported in 1995(78)ELT401(SC) 7. In view of the decisions cited above, they prayed for setting aside the impugned order. 8. The Ld.A.R submitted that the Appellant has received commission for promoting the sales of the goods manufactured by M/s.SSOMPL and hence the activity undertaken by them falls within the ambit of Service as defined under Section 65B(44) of the Finance Act, 1994 and hence liable to service tax for the period under dispute. They stated that the Appellant has not taken registration and not disclosed any information to the department and hence extended period has been rightly invoked to demand service tax. They relied on the following decisions to support their case. (i) Anshita Chawla and Ramesh Chawla Vs Commr. Of S.T. New Delhi , 2016(44)STR300(Tri-Del) (ii) Surendra Singh Rathore Vs CCE, Jaipur-I, 2014(34)STR147(Tri-Del) On the basis of the above decisions, he prayed for upholding the impugned order. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat as per the definition of service and taxable service mentioned as above, the activity i.e. promoting marketing of the products of M/s SSOMPL by DSA for which they are getting commission/incentive from M/s SSOMPL, are covered under the ambit and scope of service as defined under clause (44) of Section 65 B of the Act and taxable service as defined under clause (51) of the Section 65B. In the impugned order, it has also been concluded that under the Negative List based comprehensive approach to taxation of services with effect from 01.07.2012, the nature of the services as rendered by the Appellant are liable to service tax as they neither figure in services specified in the Negative list as per Section 66D of the Finance Act, 1994 nor there is any exemption to the same under any notification issued by the Government. 11.4. In their submission, the Appellant cited the decision in the case of Charanjeet Singh Khanuja Vs C.S.T./ Indore/Lucknow/Jaipur/Ludhiana, reported in 2016(41)S.T.R.213(Tri-Del), wherein it has been held that the incentive or commission earned for buying certain quantum of goods during a month cannot be considered as consideration received for pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. The department s contention is that these commission received by the assessees from Amway are in respect of the Business Auxiliary Service provided by them to Amway. On the other hand, the contention of the assessees is that their activity is not covered by the definition of Business Auxiliary Service as given under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994. 11. In terms of Section 65(105)(zzb), the service provided to a client by Commercial concern in relation to the Business Auxiliary Service is taxable. The term Business Auxiliary Service is defined under Section 65(19) of the Finance Act, 1994 as under:- Section 65(19) : 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 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 client includes any service provided in relation to promotion or marketing of games of chance, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very month on purchase of certain quantum of goods from Amway. 13. However, activity of a Distributor of identifying other persons, who can be roped in 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 Business Auxiliary Service of sales promotion provided to Amway. Therefore, service tax would be chargeable on the commission received by a Distributor 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation at their end. The impugned order has confirmed the demand based on this data and the statements recorded from Shri. Rajat Verma, Director of M/s.SSOMPL. We observe that there is no information available on record to indicate that what type of commission mentioned above was received by the Appellant in this case. No investigation was carried out with the Appellant to ascertain the nature of service rendered by them to M/s.SSOMPL and whether the amount received was towards rendering of any taxable service or not. In the absence of any such corroborative evidence to substantiate the allegations made in the Notice, the impugned order merely confirmed the demands based on the presumption that the entire amount was received towards rendering of taxable service and confirmed the demands made in the Notice. In the decision of the Tribunal cited above, it has been concluded that out of the three categories of income received by a DSA, the income mentioned at (a) and (b) are not liable to service tax and the income mentioned at (c) only liable to service tax. On this count, we observe that the ratio of the decision cited above is applicable for the period after 01.07.2012 also. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1368147 0 1368147 12.2. From the above table, we observe that the entire demand has been raised by invoking extended period. The Appellant submitted that there was no intention to evade payment of service tax on their part. They cited the decision in the case of Charanjeet Singh Khanuja Vs C.S.T./ Indore/Lucknow/Jaipur/Ludhiana, reported in 2016(41)S.T.R.213(Tri-Del), where on similar facts and circumstances, the Tribunal, New Delhi has held that extended period not invocable to demand service tax. The relevant part of the decision is reproduced below: 16. Another plea raised in these appeals is regarding limitation. It is the contention of the assessees 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 Department s contention, on the other hand, is that the assessees 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case. The Notice has also not brought in any evidence of deliberate defiance of law warranting invocation of extended period of limitation. 12.4. In the case of Rajasthan Spinning Weaving Mills Vs UOI, Hon ble Supreme Court held that if there is no element of deception or malpractice, neither extended period of limitation invocable nor penalty under Section 11AC would be imposable. In the case of Mahadev Logistics Vs CCE reported in 2017(3)GSTL 56(CHH), the Hon ble Chhatisgardh High Court held that the presence of mensrea is absolutely necessary for imposition of penalty under Section 78 of the Finance Act, 1994. The relevant para of the said decision is reproduced below: 12. It is settled law that an order imposing a penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged has either acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct, or acted in conscious disregard of its obligation. A penalty will not also be imposed merely because it is lawful to do so. In spite of a minimum penalty prescribed, the authority competent t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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