LALIT DONGRE Vs. COMMISSIONER OF CENTRAL EXCISE, NASHIK

JUDGEMENT

(1.) ALL these appeals are filed by individual appellants and raised the same question of law and facts accordingly, they are being disposed of by a common order. The relevant facts that arise for consideration in all the appeals are the appellants are distributors for M/s. RMP Infotec Pvt. Ltd. which is a binary network company having business model, that they enroll Direct Independent Distributors to promote the company's packages and canvas for enrolment of new members to create a chain of distributors who are as per agreement under compulsion to buy products from shopping section of M/s. RMP every month; M/s. RMP issues payment advice to each distributors indicating therein commission payable to the distributors. It is the case of the Revenue that appellants are not independent traders but commission agents of M/s. RMP and hence they are liable to pay service tax on the amount of commission received. As they are nothing but commission agents and covered under the category of Business Auxiliary Service under Section 65(19) of Finance Act, 1994, show cause notices were issued to all appellants for recovery of service tax liability, interest thereof and for imposition of penalties. All the show cause notices were contested on merits as well as on limitation. Adjudicating authority after following due process of law, confirmed the demands raised with interest and also imposed penalties. Aggrieved by such an order, appellants preferred appeals before the first appellate authority. The first appellate authority after granting personal hearing to the appellants rejected the appeals.

(2.) Learned Counsel appearing on behalf of appellants would draw our attention to the facts of the case as also the agreement entered by appellants with M/s. RMP. It is his submission that appellants cannot be considered as commission agents as it does not place on record any evidence to show that M/s. RMP is providing service on goods which is being promoted or marketed by appellants. It is his submission that appellants are distributors as can be ascertained from the fact that appellants are permitted to appoint only two distributors. It is his submission that the appellants has privity of contract of appointing distributors is limited only to two persons and any amount of purchase made by these two distributors on which appellants received commission has to be considered, in extreme case is an amount paid as commission to the appellants and submits that appointment of subsequent distributors by the distributor appointed by the appellants has no bearing on the functioning of the appellants. He would submit that definition of Business Auxiliary Service is not covering the arrangement like the one which is in this case. He would submit that the Budget Changes of 2010 -11 it brought into service tax net the multilevel marketing system hence these activities are to be covered after 2011, which is an indicative factor that the services rendered by the appellants during the period 2007 -08 onwards to 2011 -12 are not taxable. He would then submit that the decision of this Tribunal in the case of Shri Surendra Singh Rathore and Smt. Chanda Bohra v. Commissioner of Central Excise, Jaipur - : 2013 -TIOL -1582 -CESTAT -Del : 2014 (34) S.T.R. 147 (Tri. - Del.) and Shri Mahavir Saharan -, 2013 -TIOL -2055 -CESTAT -Del may not be applicable as in those cases the products, were being manufactured and supplied by M/s. Amway. He would distinguish the cases, it is his submission that in the cases in hand M/s. RMP are direct selling marketing company of various entities like Tata -AIG, Reliance Infocom and Whirlpool, etc. The business transactions between appellants and M/s. RMP are in respect of purchase of goods for further sale which cannot be covered under the category of business auxiliary services. He would extensively submit that the judgments of the Tribunal in the cases as cited above are distinguishable on the facts. It is his submission that the penalties imposed on the appellants also are incorrect and needs to be set aside as the appellant had bona fide impression that they are not liable to pay service tax liability.

(3.) LEARNED DR on the other hand after taking us through the same agreement entered by appellants submits that the said agreement clearly enforces the condition that appellants are required to purchase goods every month to worth of Rs. 10,000/ -. He would submit that the distributors appointed by the appellants and further distribution by those distributors have to purchase goods from M/s. RMP worth of Rs. 10,000/ - for which commission is paid. He submits that the issue is squarely covered by the decision in the case of Shri Surendra Singh Rathore and Smt. Chanda Bohra (supra) and reads the said decision.