Aquamarine Exports Vs C.C.E. & S.T. (CESTAT Ahmedabad)
On careful consideration of the submissions made by both sides and perusal of the records, we find that the revenue has confirmed demand of service tax on the commission which was shown as deduction in the export invoice. The revenue has treated this commission as a commission against foreign commission agent service. We find that firstly, there is no commission agent exist who provided the service for export trading of the goods exported by the appellant. When no service provider is in existence it cannot be said that the appellant have received the commission agent service. Secondly, it is also fact that the appellant have not paid the commission to any person in the foreign country. Therefore, in absence of any consideration paid for the alleged commission agent services no service tax can be demanded. In the export invoice the appellant have deducted an amount in the nomenclature of commission from the gross sale price thus, the deduction was passed on to the buyer of export goods which is nothing but a discount given to the Foreign Buyers of the goods.
In the above facts we are of the view that neither any service provider exist nor was any consideration paid to any service provider. Therefore, the department’s contention is baseless and not sustainable.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief fact of the case is that the appellant are merchant exporter and engaged in export of textiles goods such as fabrics, scarves, sarees, dress materials etc. to various countries. During the course of scrutiny of Shipping bills, it is revealed that Appellant have shown the commission amount to the tune ranging from 11% to 12% paid to commission agent located outside the India. From the scrutiny of their export invoices it is revealed that they were deducting the said commission amount from the gross value of their export goods to arrive the net value of export. The case of the department is that said commission shown in the shipping bills/ export invoices is nothing but commission paid to the commission agent towards export of goods, therefore said commission amount is chargeable to service tax under the head “Business Auxiliary Service” in terms of Section 65(19) of the Finance Act 1994 and is taxable service vide Section 65(105)(zzb) of the Finance Act,1994 read with Section 66A (19) of the Finance Act, 1994 read with section 66A of the said Act under Reverse Charge Mechanism. Accordingly Show Cause Notice was issued and the adjudicating authority confirmed the demand along with penalty and interest. Therefore, the appellant filed the present appeal.
2. Shri Willingdon Christian, Learned Counsel appearing on behalf of the Appellant submits that Appellant is not liable to pay the Service tax, as they had not received any service in India from any foreign Agent. As per the agreement with the foreign buyers, the Appellant was supposed to reduce the gross sale value by 10% as commission. The appellant have received 10% less from the gross sales price as per the purchase order placed by the foreign buyer. The entire demand of Service tax is based wholly on the amount of commission shown as deducted from the overall value shown as the sale price of the goods exported. There is only a reflection of the amount of commission allowed to the buyers, vide the export invoices, shipping bills, ARE-1 , BRC etc. In this case the identity of alleged service provider or the person from whom the appellant allegedly received the taxable service is conspicuously missing. The Appellant neither appointed any agent nor is there any foreign agent from whom they have received any service. Ld. Commissioner has failed to appreciate that in this matter, neither Section 66A of the Finance Act, 1994 nor Rule 2(d)(iv) of the Service tax Rules 1994 nor Rule 3 of the Taxation of Services (Provided from outside India and Received in India) Rules, 2006 will apply, because there is no foreign agent appointed and dealt with by the Appellant. He also submits that the present issue fully and directly covered by the Judgment of the Hon’ble Tribunal in the matter of Laxmi Exports Vs CCE 2021(44) GSTL 284 (T), Duflon Industries Pvt. Ltd. Vs CCE 2017(47)STR 335 (T)., Prabhakar Marotrao Thaokar & Sons Vs CCE Nagpur 2019(20)G.S.T.L. 294 (Tri.-Mumbai), Hindustan Petroleum Corporation Ltd- 2019 (24) GSTL 569(T), Textyard International – 2015 (44) GSTL 284 (T) , Arvind A. Traders – 2016 (44) STR 264 (T)., Wanbury Ltd – 2019 (21) GSTL 154(T) and Prudential Process Mgmt. Services (I) (P) Ltd- 2016 (42) STR 764 (T)
2.1 He further submits that even if it is assumed that the Appellant is liable to pay Service tax under Section 66A, there is refund and exemption under Notification No. 41/2007-S.T. dated 06.10.2007, Notification No. 17/2009 -ST dated 07.07.2009 and Notification No. 18/2009 S.T. dated 07.07.2009 available to the Appellant.
3. Shri Dharmendra Kanjani, Learned Superintendent (AR) appearing on behalf of the revenue reiterates the findings of the impugned order and submit that Appellant in invoices and records shown Commission amount, then it is obvious that they have received the services from the their foreign commission agent, therefore the same fall under the category of Business Auxiliary Service and the same is taxable under reverse charge mechanism under Section 66A of the Finance Act 1944.
4. On careful consideration of the submissions made by both sides and perusal of the records, we find that the revenue has confirmed demand of service tax on the commission which was shown as deduction in the export invoice. The revenue has treated this commission as a commission against foreign commission agent service. We find that firstly, there is no commission agent exist who provided the service for export trading of the goods exported by the appellant. When no service provider is in existence it cannot be said that the appellant have received the commission agent service. Secondly, it is also fact that the appellant have not paid the commission to any person in the foreign country. Therefore, in absence of any consideration paid for the alleged commission agent services no service tax can be demanded. In the export invoice the appellant have deducted an amount in the nomenclature of commission from the gross sale price thus, the deduction was passed on to the buyer of export goods which is nothing but a discount given to the Foreign Buyers of the goods.
In the above facts we are of the view that neither any service provider exist nor was any consideration paid to any service provider. Therefore, the department’s contention is baseless and not sustainable. This issue has come up time and again and the same was decided in the following judgments:
