Private Company has No Relatives, It has only Directors & Employees: CESTAT confirms Demand [Read Order]

Private Company - Taxscan

The Delhi bench of Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) in M/s. Jaipur Marmo Tiles P Ltd. vs. Commissioner of Central Respondent Excise & ST ruled that when the appellant is a private company, then it has no relatives, It has only Director or employees.

The Appellant engaged in providing ‘Business Auxiliary Services’ falling under Section 65(19)(ii) of the Finance Act, 1994. During the Auditing Revenue found that Appellant dropped the service tax on commission received and the same was demanded. Being aggrieved Appellant carried the matter to this Tribunal.

The bench comprising of President Justice (Dr.) Satish Chandra and Technical Member V. Padmanabhan have heard Kumar Vikram, Advocate and Sanjay Jain, representatives of the parties and gone through the material available on record.

During the course of arguments, Assessee argued that they are not providing any services to the client but income generated mainly through the sale of goods of their own family concerns on the basis of sharing of profit but the same was shown as commission.

The CESTAT found that during the year under consideration assessee has provided such services as a ‘Commission Agent’ and hence taxable under the category of ‘Business Auxiliary Service’.

The appellant relied on the decision in Old World Hospitality Ltd. vs. Commissioner of Service Tax and contended that sale of the good to family members cannot be considered as clients and also added that appellant is a private company constituted under the Companies Act and is a separate legal personality.

However, the Tribunal observed that “In the instant case, it appears that the appellant has shown in the balance sheet the income as ‘commission’ which is subjected to service tax under the category of ‘Business Auxiliary service’. It is an after-thought that it was profit sharing with the family members. When the appellant is a private limited company, then it has no relatives. It has only Director or employees”.

Subscribe Taxscan Premium to view the Judgment
taxscan-loader