Service tax payable on Gross Amount of Commission

Brief –  The appellant/ assessee provided services of Authorized Service Station and Business Auxiliary Services. They had acted as agent for promoting vehicle loans for which the Bank paid them commission. Out of the commission paid by the Bank, they were in fact paying some amount to the loan seekers as an incentive for taking the loan through them.

While paying service tax for amounts received as commission, the appellant deducted the amounts paid to customers from the amount received from the bank and paid service tax only on the remaining portion of the commission. The Revenue made out a case that they should have paid tax on the full amount received from the bank and issued a show cause notice to the appellant demanding tax which was short paid.

Held: We are of the view that the amount paid by the bank for the services rendered by the appellant and reflected as receipts in the books of accounts of the appellant, should be subjected to service tax and therefore, the orders passed by the lower authorities is maintainable and thus appeal filed by the appellant is rejected.

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

EM PEE MOTORS LTD.
Versus
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH

Final Order No. ST/412/2011(PB), dated 26-8-2011 in Appeal No. ST/665/2007

[Order per : Mathew John, Member (T)]. – The appellant provided services of Authorized Service Station and Business Auxiliary Services. During the period 2003-04 to 2004-05, they had acted as agent for promoting vehicle loans provided by ICICI Bank for which the Bank paid them commission. Out of the commission paid by the Bank to the appellant, they were in fact paying some amount to the loan seekers as an incentive for taking the loan through them. This amount is hereinafter referred to as ‘subvention’. While paying service tax for amounts received as commission from the bank, the appellant deducted the amounts of subventions from the amount received from the bank and paid service tax only on the remaining portion of the commission. The Revenue made out a case that they should have paid tax on the full amount received from the bank and issued a show cause notice to the appellant demanding tax which was short paid. The show cause notice was adjudicated confirming the demand. The party filed an appeal with the Commissioner (Appeals) who dismissed the appeal filed by the appellant. Aggrieved by order of the Commissioner (Appeals), the appellant is before the Tribunal.