SCN Barred by Limitation, MLM Trading Amounts to Sales: CESTAT Deems Such Activities Not Taxable [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, judged that multi-level marketing (MLM) trading of goods amounts to sale and are not taxable. The show causenotice (SCN) issued against the assessee was also barred by limitation.

The facts dictate that the SCN dated 08.10.2015 was issued to the appellant who had sold goods to third parties under a MLM scheme. He bought the goods for a cost price of INR 5,500/- and introduced four persons who also paid the same amount each to purchase the goods. As per company policy, a certain part that the company earned from the four people was paid to him. The company closed its business on 28.08.2012.

The counsel for the assessee-appellant submitted that the SCN was dated year 2015, making it time barred and therefore the demand sought is also barred by limitation.

The tribunal relied on Tulip Global Private Limited v. Commissioner of Central Excise, and held that the nature of marketing of goods under an MLM model would amount to sales and not fall within the ambit of taxable service. The bench also referred to a frequent case of Tabassum Enterprises v. C, CGST & CX.

Further, the single member bench of CESTAT noted that the extended period of limitation is not invocable in the present case as the SCN is issued solely on the basis of third-party data without proper verification and without establishing suppression or wilful mis-statement. R. Muralidhar (Judicial Member), on behalf of the tribunal, held that the demand is also hit by limitation and allowed the appeal.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates