By Puloma Dalal, Jayesh Gogri, Mandar telang Chartered Accountants
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Reimbursement received for incentive paid on behalf of its principal by a commission agent, to various retailers selling products of its principal is not includible in value of BAS.
Facts:
The assessee was engaged in marketing and promoting various kinds of Indian Made Foreign Liquor (IMFL). It received consideration from the beer manufacturer under various heads like Primary Claim/Retail Scheme, commission, merchandise expenses, fixed office expenses, other expenses. Department was of the view that service tax be levied on the entire consideration received by the assessee under “Commission Agent” (Business Auxiliary Services). The Commissioner (Appeals) held that service tax would be levied only on commission. In department’s appeal before the Tribunal, it was held that assessee is also liable to pay service tax on merchandise expenses, fixed office expenses and certain part of the other expenses excluding expenses of registration and transportation. Department further preferred appeal before the High Court contending that amount received under the head Primary claim/Retailer scheme is also liable to service tax
Held:
The High Court held that the head of primary claim/retailer scheme is the amount which the service provider gave to retailers on behalf of manufacturer for achieving certain quota of sales. It was then reimbursed to it. Rule 5(2) qualifies the conditions under which fixed expenses or costs incurred by the service provided is to be excluded. It was observed that Commissioner (Appeals) after discussing the material on record recorded a finding that this was the expense that was done by the assessee as a pure agent and this finding has also been upheld by the Tribunal. Therefore, Revenue’s appeal was dismissed.
