By TIOL News Service

MUMBAI, SEPT 22, 2014: THE appellants have been engaged as an outsourcing agent by the postal department and they have been asked to canvass business for the postal department. For the business so canvassed, the postal department pays them a commission based on the turnover of business achieved/canvassed.

It is the case of the department that the appellant is liable to pay Service Tax under the category ‘Business Support Service' on the commission so received. The Commissioner(A) confirmed the service tax demand of Rs.1,96,759/- along with interest.

Against this order, the appellant is before the CESTAT and submits that since the postal department pays service tax on the entire consideration received in respect of speed post services for which the appellant is the canvassing agent, there is no additional liability accruing to the appellant and, therefore, stay be granted. Reliance is also placed on the decision in Speed & Safe Courier Service - 2010-TIOL-493-HC-KERALA-ST where in the context of franchisee services rendered to a courier agency, it was held that when the service tax liability was discharged by the courier agency on the consideration received there is no separate tax liability on the franchisee in respect of the courier services provided by him to the courier agency.

The AR submitted that the appellant has rendered BSS to the postal department by canvassing speed post services for which they are receiving a commission and on this commission the department is demanding service tax; that the lower appellate authority while passing the impugned order has confirmed service tax demand for the normal period of limitation along with interest and also waived the penalty; that against the said order for dropping of the demand beyond the normal period of limitation the Revenue is also in appeal.

The Bench observed -

++ The service tax regime in India operates on the principle that whosoever is rendering a taxable service is liable to discharge service tax liability on the consideration received.

++ If the service received is an input service for the recipient of the service, he can avail CENVAT credit of the service tax paid on the input service. The availability of CENVAT credit on the input service does not obliterate or negate liability to pay service tax on the input service.

++ At every stage of rendering service or manufacture of goods, the duty/tax liability has to be discharged and at the subsequent stage the credit of the duty/tax paid is taken. This is the premise on which the entire service tax regime at the Central level operates.

++ Therefore, there is no merit in the contention of the appellant that merely because the postal department pays service tax on the speed post service, the appellant need not discharge service tax liability in respect of the business support/auxiliary service rendered by him in canvassing business for the postal department.

Holding that the appellant has not made out any prima facie case for complete waiver of pre-deposit of dues adjudged against them, the Bench directed the appellant to make a pre-deposit of 50% of the service tax confirmed and report compliance for obtaining a stay in the matter.

The Revenue appeal was also directed to be tagged with the present appeal for a final hearing in the matter.

(See 2014-TIOL-1807-CESTAT-MUM)