Service tax applicablity on commission from mobile operator

Dear Sir/Madam

I want to know about the applicability of service tax on commission received on sale of recharge value to retail customers.

The party is a service tax registered and authorised agent of airtel and he is receiving the value from airtel against deposits and airtel reimburse the commission on the sold value @ 4,25%. After the same the party pass on the commission to the end retail seller @ 3% adn remaining 1.25% credited to the account of the party.

Now the total turnover of the party is less than Rs. 8.00 Lacs and department has issued show cause notice to the party to deposit the service tax amount on the commission.

So please guide me the applicablity of the provisions.