We find that there is no dispute that the appellant is an individual NRI in USA. During the relevant period this Tribunal has given various judgments wherein it was held that an individual and / or proprietorship concern is not considered as a commcerial concern, therefore, the service tax under BAS is not payable by such individual.
Since definition of commercial concern which have taken effect from 1-5-2006 wherein the word ‘commercial concern’ has been substituted by “any person”. Therefore intention of the legislature is clear that prior to 1-5-2006, the services provided by an individual was not to be treated as service provided by commercial concern.
It has been decided that an individual or a proprietor or a proprietorship concern cannot be charged service tax under BAS. Considering the above position of law, we set aside the impugned order and allow the appeal. Since the appeal is allowed on the above discussed ground, we do not address other issues raised by the assesse.
FULL TEXT OF THE CESTAT JUDGEMENT
The brief facts of the case are that the appellant is a Non-Resident Indian providing service of Commission Agent to Indian Service Recipient i.e. Amway Enterprise in USA. The service tax demand was confirmed against the appellant. The following issues arise from the impugned order.
1. Whether appellant being NRI agent liable to pay service tax or recipient of service is liable for the service tax.
2. Whether demand of service tax under the BAS is sustainable or not.
3. Whether appellant as an Individual provided a service to a client can be termed as commercial concern or not.
4. Whether appellant is eligible for the SSI exemption vide notifn. No. 5/2005 w.e.f. 01.04.2005 or not.
5. When appellant had interpretation difference and classification dispute, whether extended period can be invokable or not.
6. Whether penalty can be imposable or not.
2. Sh. Vipul Kandhar, Ld. C.A. appearing on behalf of the appellant submits that the appellant is an NRI and staying in USA and he does not have office or establishment in India. He provided services of Commission Agent for marketing of goods of Amway Enterprise India in USA. As per Section 66A in such case the service tax liability is on Amway Enterprise who have discharged the service tax liability on this service. He further submits that the demand of service tax was raised under BAS, the appellant being an individual proprietorship concern not considered as commercial concern, hence, he is not liable to pay service tax. In this regard he placed reliance on the following judgment.
3. He further submits that the appellant being proprietorship is exempted from payment of service tax in terms of Notification No. 14/2004-ST dated 10.09.2004. On all these counts, the demand is not sustainable on the appellant.
4. Shri. S.K. Shukla, Ld. Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
5. We have carefully considered the submissions made by both the sides and perused the records. We find that there is no dispute that the appellant is an individual NRI in USA. During the relevant period this Tribunal has given various judgments wherein it was held that an individual and / or proprietorship concern is not considered as a commcerial concern, therefore, the service tax under BAS is not payable by such individual. In the case of Pratap Singh Jyala (supra) this Tribunal observed as under:
“6. I have gone through the case law relied by learned AR in the case of Employ Me. The definition has been taken as the commercial concern which indicate that the concern is engaged in the activity with profit motive. The said meaning has not defined if the individual is engaged in the activity of profit then same can be called as commercial or not. Therefore, said case law is not relevant to the facts of the present case. As in the case of Laxmi Engineering Works (supra), the Hon’ble Apex Court has treated the commercial concern as sole proprietorship. The said case is not applicable to the facts of the present case as appellant is not a proprietorship concern. Further the decision of Bazpur Co-op Sugar Factory Limited is squarely applicable to the facts of this case as in that case it was held that individual concern is not liable to pay any Service Tax. Moreover, same view was taken in the case of Mangal Singh. Further, I find that since definition of commercial concern which have taken effect from 1-5-2006 wherein the word ‘commercial concern’ has been substituted by “any person”. Therefore intention of the legislature is clear that prior to 1-5-2006, the services provided by an individual was not to be treated as service provided by commercial concern. Moreover in this case, show cause notice has been issued by invoking extended period of limitation whereas there is no suppression on the part of the appellant that appellant being a commercial concern suppressed the fact from the department not to pay the Service Tax. In these circumstances, I hold that appellant is required to pay Service Tax for the period 2004-2005 and 2005-2006 under the category of Business Auxiliary Service being an individual by invoking extended period of limitation.
7. Therefore, impugned order is set aside. Appeal is allowed with consequential relief, if any.”
In case of Beena Goyal, this Tribunal observed as under:
“11. In view of the Ministry’s clarification Circular No. 80/10/2004-S.T., dated 17-9-2004, I agree with the contention of the appellant that during the relevant period there was no intention to levy tax on proprietaryship concern under the category of “Business Auxiliary Service”. So I set aside the demand under this category. Once the argument is accepted the penalty under Section 77 is not maintainable because it is imposed for not taking registration under Business Auxiliary Service.
12. I am not in agreement with the argument that there was no suppression of information because in a computerized environment there is no scope of making a mistake of the type claimed and it is obvious that the value was misdeclared for paying tax. However I take note of the decision of the Punjab and Haryana High Court in the case of CCE v. City Motors –2010 (19) S.T.R. 486 (P & H) and hold that there is no case for imposing penalty under Section 76 and Section 78 in this type of cases. So I set aside the penalty imposed under section 76.”
In case of Jitender Lalwani, this Tribunal observed as under:
“5. On hearing both the sides we find that both the lower authorities have dropped the demand by taking into consideration clarification issued by the board through their circular being Circular No. 59/8/2003, dated 20-6-2003, 62/11/2003-S.T. (F. No. B3/7/2003), dated 21-8-2003 and B/2/8/2004-TRU, dated 10-9-2004.
6. There is no dispute on the facts that the appellant in his individual capacity has provided services to M/s. Amar Products and was not having any commercial concern for undertaking the business in regular course. As such we find no infirmity in the views adopted by Commissioner (A) or the original adjudicating authority which is based upon boards circular and the precedent decisions.
7. Apart from the merits we also note that the lower authorities have rightly explained the benefits to the respondent on the issue of time bar. Admittedly, during the relevant period there was a lot of confusion. All the activities undertaken by the appellant were a part of the reflection made in the balance sheet and income tax return in which case no suppression or mala fide can be attributed to the assessee. Revenue has not been able to produce any evidence on record to show that the tax which according to the revenue was payable was not being paid on account of any mala fide. As such we agree with the lower authorities that the extended period would not be available to the Revenue.
8. We also note that an identical appeal of the Revenue being appeal No. ST/384/2012-CU(DB) stands rejected by the Tribunal vide order dated 25-11-2016. In view of the foregoing discussion we find no merits in the revenues appeal. The same is accordingly rejected.”
6. In the above cited decisions, it has been decided that an individual or a proprietor or a proprietorship concern cannot be charged service tax under BAS. Considering the above position of law, we set aside the impugned order and allow the appeal. Since the appeal is allowed on the above discussed ground, we do not address other issues raised by the assesse.
(Pronounced in the open court on 02.01.2019)