Custom, Excise & Service Tax Tribunal
M/S. Sify Technologies Ltd vs Commissioner Of Service Tax, Chennai on 20 September, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
ST/633/2009
(Arising out of Order-in-Appeal No. 62/2009 (M-ST) dated 30.9.2009 passed by the Commissioner of Central Excise (Appeals), Chennai)
M/s. Sify Technologies Ltd. Appellant
Vs.
Commissioner of Service Tax, Chennai Respondent
Appearance Shri M. Karthikeyan, Advocate for the Appellant Shri K. Veerabhadra Reddy, JC (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing / Decision: 20.09.2017 Final Order No. 42171 / 2017 Per Bench Brief facts are that the appellants are engaged in providing facility to merchants on their website namely www.sifymail.com to offer their merchandise for sale and receive consideration for the use of the said portal. The intending buyers placed orders and made payments through the designated bank payment gateway. Payments for the sale made by merchants using appellants portal was collected by the appellant and the goods were delivered to the buyer by the merchant on confirmation of receipt of price. The appellant remits the net sale price after deducting their consideration. They were not discharging service tax on the amount so retained by them. Department was of the view that they were rendering services under the category of Business Auxiliary Service for the consideration received by deducting their commission. On being pointed out, the appellants paid an amount of Rs.24,94,830/- towards service tax along with interest. A show cause notice was issued for the period 1.7.2003 to 28.2.2007 raising the above allegations and proposing to demand service tax to the tune of Rs.32,63,274/- along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand along with interest and imposed penalties. In appeal, Commissioner (Appeals) upheld the demand along with interest as well as penalty imposed under section 78 of the Finance Act, 1994 but however set aside the penalties imposed under sections 76 and 77 of the Finance Act, 1994. Hence this appeal.
2. On behalf of the appellant, ld. counsel Shri M. Karthikeyan submitted that the appellant has discharged service tax liability for the period 9.7.2004 till 28.2.2007 demanded in the show cause notice. That the appellant does not wish to contest the demand for the period after 9.7.2004. In respect of the demand for the period 1.7.2003 to 8.7.2004, he submitted that the demand is hit by limitation since there is no allegation established against the appellant that they suppressed the fact with intent to evade payment of service tax. It was also argued by him that for the said period 1.7.2003 to 8.7.2004, appellant would be covered by the benefit of the Notification No.13/2003 dated 20.6.2003. The said Notification exempts commission agents rendering Business Auxiliary Service from service tax liability. The term commission agent means a person 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. Though the appellant contended before the lower authorities that the appellant would fall within the definition of commission agent, such contention was not considered at all observing that the appellant plays a role more than that of a commission agent. He submitted that the appellant was receiving consideration only on the basis of sale of the goods by utilizing the web portal of the appellant. Even though the appellant was collecting sale proceeds and forwarding to merchants, this activity would also fall within the definition of commission agent and that the appellant would be eligible for the benefit of the notification. He relied upon the decision of the Tribunal in the cases of Brindco Sales Ltd. Vs. Commissioner of Service Tax 2015 (40) STR 986 and Chahabria Marketing Ltd. Vs. Commissioner of Service Tax, Mumbai 2016 (43) STR 193 to contend that the appellant cannot be debarred from being called as commission agent even though the assessee may be rendering other services in relation to main function of commission agent.
3. The next argument put forward by the counsel was that the appellant had not discharged service tax only on the bonafide belief that the activity was not a taxable one. Only with effect from 1.5.2006, the activity has become taxable under internet advertisement services. However, the department contended that the activity would fall within the definition of Business Auxiliary Service and the demand has been raised. That the failure to discharge service tax was only due to the confusion with regard to whether the activity carried out by the appellant would be taxable or not and therefore the demand raised invoking extended period is unsustainable. However, on being pointed out, the appellant has immediately paid service tax along with interest even before issuance of the show cause notice. For these reasons, the penalty imposed under section 78 is unwarranted.
4. On behalf of Revenue, ld. AR Shri K.Veerabhadra Reddy supports the impugned order. He submitted that the appellants do not fall within the definition of commission agent and therefore the authorities below have rightly denied the exemption granted by Notification No. 13/2003. The appellants are rendering services other than which fall within the definition of Business Auxiliary Service, for example, they collect the amount on behalf of the merchants from the buyers and pay the same to the merchants. From the sale proceeds the appellant deduct their commission and remits the net sale to the merchant. That therefore they do not fall within the definition of commission agent. The non-payment of service tax would not have come to light but for the investigation conducted by the department. The appellant failed to take registration under Business Auxiliary Service to discharge service tax liability for the said activity. That therefore they are guilty of suppression of facts and the demand raised invoking extended period is legal and proper.
5. Heard both sides and perused the records.
6. The appellant challenges demand only for the period 1.7.2003 to 8.7.2004 on two grounds. Firstly, that they would be covered by the definition of commission agent which exempts payment of service tax under Business Auxiliary Service for the period prior to 9.7.2004. The authorities below have failed to accept this contention of the appellant observing that the appellant does not fall into the definition of commission agent. For better appreciation, the definition of commission agent attached to the said notification is reproduced as under:-
Business Auxiliary services provided by commission agents Exempted In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts the business auxiliary services provided by a commission agent from the service tax leviable thereon under sub-section (20 of section 66 of the said Act.
Explanation For the purposes of this notification, commission agent means a person 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.
7. When the activity of the appellant is to identify the customer through their web portal and receive the sale proceeds on behalf of the merchant and pay the same to the merchant, it does have same bearing to the definition of commission agent. The appellant cannot be found fault with if they believed bonafidely that they would fall within the definition. In the decisions relied upon by the appellant, the Tribunal has considered a similar issue that even the assessee was rendering some other services apart from that of commission agent service, the benefit of the notification has to be extended to the assessee. Following the said decision, we hold that the demand for the period 1.7.2003 to 8.7.2004 is unjustified and requires to be set aside which hereby do.
8. The appellant has pleaded to set aside the penalty imposed under section 78 of the Finance Act, 1994. There is no challenge with regard to the payment of service tax made after 9.7.2004. Taking into consideration the fact that the appellant has made payment of service tax along with interest even before issuance of the show cause notice as well as of the fact that the issue was an interpretational one and during the relevant period there was much confusion as to whether the said activity would fall within the Business Auxiliary Service or under internet advertisement services, which was introduced after 1.5.2006, we are of the considered opinion that the penalty imposed under section 78 is unjustified. We therefore set aside the penalty imposed under section 78.
9. In the result, the impugned order is modified to the extent of setting aside the demand for the period 1.7.2003 to 8.7.2004 and set aside the penalty imposed under section 78 of the Finance Act, with consequential relief if any.
(Operative portion of the order was
pronounced in open court)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
Rex
4
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