PSV Polymers Pvt Ltd Vs Commissioner of Central GST and Central Excise (CESTAT Delhi)
Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Delhi has set aside a service tax demand, along with interest and penalties, against PSV Polymers Pvt Ltd. The ruling addressed two key issues: service tax on commission paid to foreign agents for export orders and service tax on rent paid to the company’s directors for godowns. The Tribunal’s decision was largely based on the principle of revenue neutrality and the capacity in which services were rendered.
The appellant, PSV Polymers Pvt Ltd, is engaged in manufacturing guar gum powder for export and regularly availed CENVAT credit on inputs, capital goods, and input services. An audit revealed that the company had remitted ₹75,43,666 to foreign agents for obtaining export orders between April 2010 and September 2014. The Revenue contended that these services were liable to service tax under the Reverse Charge Mechanism (RCM), as per Section 66A of the Finance Act, 1994, which deems such imported services taxable in the recipient’s hands. For the period up to June 30, 2012, these services were categorized as “business auxiliary services” under Section 65(19), and thereafter under Section 65(44). The Revenue also argued that under Rule 3 of the Place of Provision of Services Rules, 2012 (effective from July 1, 2012), the location of the service recipient (the appellant) determined the place of provision, making them liable under Section 68(2) of the Finance Act, 1994.
