By TIOL News Service

MUMBAI, MAY 14, 2015: THE appellant is engaged in providing "Banking and other Financial Services". During scrutiny of the records, it was observed that appellant had received commission amounting to Rs.8,35,348/- during the period April 2004 to September 2007 for disbursement of Government teachers' salary.

The Revenue authorities opined that the said commission is taxable under the category of Business Auxiliary Services.

After all, there is no harm in opining and then letting the law take its own course!

The Sahakari bank was served a SCN demanding service tax and both the lower authorities did not bat even an eyelid while confirming the ST demand along with penalties and interest.

Before the CESTAT the appellant submitted that the amount received by them would not fall under the definition of commission by ‘any stretch of imagination' as the amounts which was disbursed by the appellant, on behalf of the Zilla Parishad, is the salary of the Government teachers and not a service undertaken by the appellant as commission agent.

The AR stuck to the departmental stand.

The Bench observed -

++ We find that the lower authorities were error in holding that appellant would fall under the category of commission agent and the amount received by them from the Government of Maharashtra through Zilla Parishad as service charges for disbursement of salaries of Govt. teachers cannot be considered as commission received though it may be entered in the records of the appellant as commission received. In order to appreciate the correct legal position, it is required to look into the definition of commission agent as per Financial year 2005 which is as under:

"The Finance Act, 2005 has inserted an explanation below Section 65(19) so as to clarify that "Commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provisions or receipt of service for a consideration and includes any person while acting on behalf of another person-

(a) deals with goods or services or documents of title to such goods or services or

(b) collects payment of sale price of such goods or services; or

(c) Guarantees for collection or payment for such goods or services; or

(d) undertakes any activities relating to such sale or purchase of such goods or services."

++ It may be seen from the reproduced definition of the commission agent is defined as a person who while acting on behalf of other person undertakes the activity as mentioned herein above para (a)to (d). None of the above activities as indicated herein above is undertaken by the appellant as disbursement of salaries to the Govt. teachers would not fall in any of the activity, sale or purchase of goods or service. In our considered view, an amount received as a consideration for disbursement of salaries to the Govt. teachers on direction of Zilla Parishad can never be an activity covered under the definition of Business Auxiliary Service and more so it cannot be termed as an amount received by the appellant as commission agent. In view of the facts and circumstances of this case, we hold that the impugned order is unsustainable and liable to be set aside and we do so.

The order was set aside and the appeal was allowed.

In passing: Perhaps, the time has come to impose penalties for generating frivolous disputes & providing fodder service to the auxiliary litigation business!

(See 2015-TIOL-867-CESTAT-MUM)