By TIOL News Service

MUMBAI, MAR 06, 2013: THE appellant owns a premium showroom and have been discharging service tax liability since November 2005 under the category of “Business Auxiliary Service”. Scrutiny of the records of the appellant revealed that the appellant has entered into a Management Agent agreement dated 23/09/2005 with M/s. Titan Industries Ltd. (TANISHQ). As per the agreement, it has been made a Principal to Agent basis where the appellant shall display, stock and sell jewellery products to customers through the showroom managed and operated by the agent on a stock transfer basis. The appellant agent is required to ensure that the showrooms are best designed, maintained and operated and shall be responsible for the upkeep and maintenance of the showrooms. The appellant agent is also required to insure the premises, furniture and fittings and allied services to the satisfaction of the principal. The agent is further required to stock, display and sell the products in the showroom in the name of Titan Industries Ltd. and the cash memos issued for sale shall also carry the name of Titan Industries Ltd. The money collected as receipt of sale have to be deposited in the designated bank account of the principal on the same day or on the following day of sale and any failure to do so will attract 24% interest per annum. Upon the services rendered, the appellant receives a consideration in the form of “management fees”, which is based on the turnover of sales and for different slabs of sales turnover, percentage of the management fee also varies.

During the period 01/07/2003 to 31/03/2004 the appellant received consideration amounting to Rs. 27,53,522/- on which the service tax liability under BAS worked out to Rs. 2,20,282/-; for the period 01/04/2004 to 08/07/2004 the appellant received a consideration of Rs.9,09,258/- on which the service tax liability amounted to Rs. 72,741/-. However, the appellant did not discharge the service tax liability.

Accordingly, a SCN was issued on 28/12/2007 demanding ST of Rs.2,93,023/-.

The Deputy Commissioner dropped the proceedings on the ground that during the impugned period the appellant was eligible for exemption under Notification No.13/2003-ST dated 20/06/2003.

The said order was reviewed by the Commissioner, who after issuing a notice u/s 84(2) adjudicated the case and after denying the exemption notfn. 13/2003-ST confirmed the demand and imposed penalty and interest.

So, the appellant is before the CESTAT.

It is submitted that -

+ against the order of the Dy. Commr. dropping the demand the department had preferred an appeal before the Commissioner (Appeals) on 17/07/2008 but the same was withdrawn vide application dated 24/10/2008.

+ Thereafter, the revisionary proceedings were initiated and the impugned order had been passed.

+ Once the appeal before the Commissioner (Appeals) is withdrawn, the order of the lower adjudicating authority has become final and, therefore, no proceedings can be initiated [Bhagawati Electrical Industries Vs. CC, Hyderabad reported in 2004 (189) ELT 467.]

+ The activity undertaken by the appellant is squarely covered by notification 13/2003-ST in view of the decisions in CCE, Ahmedabad vs. Somani Exports, (2008-TIOL-2138-CESTAT-AHM ), Premier Enterprises Vs. CCE, Hyderabad, (2009-TIOL-1116-CESTAT-BANG) CCE, Allahabad Vs. Chandan Chemicals, (2007-TIOL-724-CESTAT-DEL).

The Revenue representative submitted that there is no merit in the submission of the appellant and, therefore, the order needs to be sustained.

The Bench observed -

"5.1 I have perused the Management Agent agreement entered into by the appellant with the principal M/s. Titan Industries Ltd. In terms of the agreement, the appellant is required to display, stock and sell jewellery products to the customers through showrooms managed and operated by the agent on stock transfer basis. The design, maintenance and operation of the showrooms has to be provided by the agent. The agent, subject to approval by the principal, can also appoint any number of additional agents, franchisees, dealers, assignees, etc. There is also condition that the agent shall manage and operate or deal in the showroom only the products supplied by the principal company and shall not deal with any other products in the showroom except with the prior written consent of the principal. Even the bills raised for the sale of the products should be in the principal's name. All the expenses in running the showroom such as wages, salary, employee payments, etc. have to be borne by the agent. In consideration for these services rendered, the agent is entitled to receive a “management fee” based on the turn over achieved by him on a slab basis. From the tenor of the agreement, it is absolutely clear that the appellant is not a mere “commission agent” as envisaged in the Notification No.13/2003. As per the definition of Commission agent given in the explanation to the notification, Commission agent means “a person who causes sale or purchase of goods on behalf of another person for a consideration which is based on quantum of sale and purchase of goods”. The case laws relied upon by the appellant in the case of Premier Enterprises, Chandan Chemicals and Somani exports cited supra are distinguishable on facts. In those cases there was no condition relating to operation and maintenance of the showroom or restriction regarding dealing in other products. Further, there was no condition stipulating that even receipts/cash memos issued to the buyers should be in the principal's name and sales tax registration of the principal should be indicated. In the present case, the appellant is not merely acting as a Commission Agent but does something much more than that i.e., designing, managing and operating a showroom, receiving goods on stock on transfer basis, undertaking sales promotion activities and collecting the sale proceeds on behalf of the principal. These activities in my view do not come within the purview of “Commission agent' as defined in the notification NO.13/2003. Therefore, I do not find any infirmity in the order of the Commissioner in holding that the appellant is not eligible for the benefit of notification No.13/2003.

5.2 As regards the other contention that initially an appeal was filed before the Commissioner (Appeals), which was withdrawn subsequently and thereafter the order was taken up in review, there is no restriction in the law in doing so. Once the appeal before the Commissioner (Appeals) is withdrawn, the Commissioner is free to initiate review proceedings in terms of Section 84. Such a course of action cannot be faulted so long as it is done within the time stipulated in the said section. In the instant case, the review action undertaken by the Commissioner is within the time limit prescribed."

Holding that there was no merit in the appeal, the same was dismissed.

(See 2013-TIOL-389-CESTAT-MUM)