Commissioner Of Service Tax, Ahmedabad vs M/S. Dharmshil Agencies

(Arising out of OIA-17-2008-STC-RAJU-COMMR-A-AHD dated 29.11.2007, passed by Commissioner (Appeals) Central Excise & Service Tax, Ahmedabad)

Commissioner of Service Tax, Ahmedabad : Appellant (s)

VERSUS

M/s. Dharmshil Agencies : Respondent (s)

Represented by :

For Appellant (s) : Shri J. Nair, Authorised Representative For Respondent (s) : Shri Uday Joshi, Advocate

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Hon'ble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Hon'ble Member (Technical)

Date of Hearing / Decision : 28.07.2015

ORDER No. A/11114 / 2015 Dated 28.07.2015

Per : Mr. P.K. Das;

The Revenue filed this appeal against the order of the Commissioner (Appeals) where the adjudication order was set-aside.

2. The relevant facts of the case, in brief, are that the Respondent was holding the Service Tax registration under the category of Consulting Engineer and Business Auxiliary Service. A show cause notice dated 25.01.2007 was issued proposing the demand of service tax of Rs. 11,38,072/- alongwith interest and to impose penalties under various provisions of Finance Act, 1994 for the period from 01.7.2003 to 09.09.2004. The Respondent took a stand before the adjudicating authority that they received commission from the principal for causing the sale of their product and other incidental activities. It was stated that they were eligible for the benefit of exemption Notification No. 13/2003-ST dated 20.6.2003. The Respondent also contested the demand on limitation. The adjudicating authority confirmed the demand of service tax alongwith interest and also imposed penalties under various sections. The Commissioner (Appeals) set-aside the adjudication order and allowed the appeal filed by the Respondent on merit.

3. Learned Authorised Representative for the Revenue reiterates the grounds of appeal. He submits that the Commissioner (Appeals) held that the Respondent carried out promotional activities of the products. It is submitted that promotional activities would not cover sale of goods under Notification No. 13/2003-ST (supra). He drew the attention of the Bench to the relevant portion of the adjudication order to substantiate that the activities carried out by the Respondent is mainly promotional activities. He also submits that the exemption would be granted on the sale or purchase of the goods. It is submitted that the notification is valid up to 08.07.2004 and therefore, demand of service tax for the period 09.07.2004 to 09.09.2004 is liable to be upheld.

4. Learned Advocate on behalf of the Respondent submits that the nature of activities by the Respondent is predominantly of sale of goods. He drew attention of the Bench to reply to the show cause notice, where it is stated that they received commission depending on the sale of goods. He submits that the other activities in connection with sale of goods are incidental. He relied upon the decision of the Tribunal in the case of CCE, Vadodara-I vs. M.A. Menon & Co.  2009 (13) STR 653 (Tri. Ahmd.). He particularly submits that demand of service tax for the period 09.07.2004 to 09.09.2004 is barred by limitation, as there is no suppression of facts with intent to evade payment of duty. He also drew attention of the Bench to the findings of the Commissioner (Appeals). He relied upon the decision of the Honble Supreme Court in the case of Kaur & Singh vs. CCE, New Delhi  1997 (94) ELT 289 (SC).

5. After hearing both the sides and on perusal of the records, we find that the Respondent was engaged in providing services as Commission Agent for products such as yarn and textile machinery. It is seen from the reply of the show cause notice that the commission was paid on principal to principal and case to case basis, depending upon various factors and quantum of commission is depending on such sale or purchase by the customer from the principal. It is categorically stated that they received commission only on sale of materials and payment is received from the customer. Notification No. 13/2003-ST (supra) extended the exemption to Business Auxiliary Services provided by a Commission Agent from service tax leviable thereon, under Section 66(2) of the Finance Act, 1994. Explanation to the said notification clarifies that Commission Agent is one who causes sale or purchase of goods on behalf of another person for a consideration, which is based on the quantum of such sale or purchase.

6. The contention of the learned Authorised Representative on behalf the Revenue is that the Respondent provided services much beyond the scope of a Commission Agent, as defined in the Explanation to exemption notification, as the Respondent was also responsible for the realisation of the sale proceeds, installation of machinery (as and when required) and had also carried out the sales promotional activities by way of survey and other means. We find that the Respondent had took a definite stand before the lower authorities that they received commission when the sale is materialised and the quantum of commission is depending on such sale or purchase by the customer from the principal. The expressions consideration which is based on the quantum of such sale or purchase in the Explanation to exemption notification, make it clear that commission should be depending on quantum of sale. In the present case, we find that the Respondent had received commission depending upon such sale or purchase by the customers. The Tribunal in the case of CCE, Vadodara-I vs. M.A. Menon & Co. (supra) held that primarily the Respondent is a Commission Agent and other activities are incidental thereof. The relevant portion of the said decision is reproduced below:-

3.? We have considered the submissions made by both the sides. There is no dispute as regards facts. As per facts on record, the respondents are required to promote entire product range of the principal which involves identification of customers, explain the utility of the product, obtain samples from the principal and provide for trial and if the customer finds the product suitable - transaction thereafter take place between principal and customer directly and respondent gets a fixed commission only after the sales takes place and payment is realized. They also submit a report about the customer to the principal. They dont hold stock of any product on behalf of the company. From the facts enumerated above, it is clear that the respondents get commission only when the sale materializes and payment is received from the customers. However, if business auxiliary services was the main activity, the Revenues could not have been linked totally to the sale of the product. We agree with the view taken by the Commissioner that primarily the respondent is a Commission Agent and other activities are to incidental to commission agency and therefore, their claim for benefit of exemption under the notification cited above is to be allowed. In view of discussions above, the appeal filed by the Revenue is rejected.

In the present case, we agree with the order of the Commissioner (Appeals) that the respondent are eligible for the exemption benefit under Notification No. 13/2003-ST (supra) for the period 01.7.2003 to 08.7.2004.

7. Regarding the demand of service tax for the period from 09.7.2004 to 09.09.2004, we find force in the submission of the learned Authorised Representative, as the extended period of limitation would be invoked. We find that the Respondent was registered with the Service Tax authorities under the category of Consulting Engineer and Business Auxiliary Services. Learned Advocate on behalf of the Respondent submits that they have started paying service tax from 10.09.2004 and therefore they were under the impression that they were eligible for the exemption benefit till 09.09.2004. He also submits that the adjudicating authority had not given any findings that Respondent had intention to evade payment of service tax.

8. We are unable to accept the submission of the learned Advocate. We find that the Respondent was already registered with the Service Tax authorities and availing the benefit of exemption notification 13/2003-ST (supra) and therefore, it was within the knowledge of the Respondent that this exemption notification was amended by Notification No. 08/2004-ST dated 09.7.2004. It is noted that they have started paying service tax from 10.09.2004 but there is no reason as to why they were not paying service tax from 09.7.2004. We have also noticed that respondent had not filed monthly ST-3 returns during the period 01.7.2003 to 09.09.2004. The adjudicating authority observed that Respondent suppressed the material fact regarding receipt of Commission regarding the services provided by them, in our view, it is sufficient to construe suppression of fact with intent to evade payment of tax. Hence, extended period of limitation would be invoked for the two months as mentioned above.

9. In view of the above discussion, we uphold the order of the Commissioner (Appeals) for the period 01.7.2003 to 08.7.2004. The demand of service tax alongwith interest for the period 09.7.2004 to 09.09.2004 is upheld. However, considering the facts and circumstances of the case, the imposition of penalty under Section 78 of the Finance Act, 1994 for the said period is sufficient. Appeal filed by the Revenue is disposed of in above terms.

(Dictated and pronounced in the Court)

(P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial) ..KL

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