2010 (11) TMI 355 - AT - Service Tax

Exemption - Business Auxiliary Services - The appellant the commission agent for fabric-sourcing and procurement of high quality fabrics - Exemption from the payment of Service Tax in terms of Notification No. 14/04-S.T.,was denied on the ground that the assessee was not engaged in providing Business Auxiliary Services of textile processing - The assessee is a commercial concern, which provides Business Auxiliary Services relating to procurement of goods (fabrics) which are inputs for the client. The assessee herein being an individual, not falling within any of the seven categories set out in the provisions, is not required to establish that it is providing Business Auxiliary Services in respect of either procurement of goods or services - Hence, the assessee is covered by the first part of the Notification and thus not required to decide the applicability of the proviso of the Notification - The assessee is, therefore, entitled to benefit of the exemption under Notification No. 14/04

Summary

Issues:
- Denial of exemption from Service Tax under Notification No. 14/04-S.T. to a commission agent for fabric-sourcing and procurement of fabrics for a garment manufacturer.
- Interpretation of the provisions of the Notification regarding Business Auxiliary Services.
- Applicability of the exemption to an individual commission agent procuring goods for clients.

Analysis:

The judgment by the Appellate Tribunal CESTAT, CHENNAI, involved the issue of denial of exemption from Service Tax under Notification No. 14/04-S.T. to a commission agent acting as a fabric-sourcing intermediary for a garment manufacturer. The appellant, a proprietary concern, engaged in procuring high-quality fabrics for a garment manufacturer, was denied the benefit of exemption by the authorities on the grounds that the appellant was not providing 'Business Auxiliary Services' of textile processing.

The Tribunal analyzed the Notification's provisions exempting taxable services provided by a commercial concern in relation to Business Auxiliary Services. The Notification listed specific activities exempt from service tax, including procurement of goods or services, production of goods on behalf of the client, provision of services on behalf of the client, or services incidental to specified activities. The Tribunal noted that the appellant, as a commercial concern procuring fabrics for the client, fell within the scope of the exemption criteria outlined in the Notification.

Furthermore, the Tribunal emphasized that the appellant, being an individual commission agent not falling within the categories specified in the proviso of the Notification, was not required to establish providing Business Auxiliary Services in specific areas like agriculture, printing, textile processing, or education. As the appellant was procuring goods that were inputs for the client, the Tribunal concluded that the appellant was entitled to the exemption under Notification No. 14/04. Consequently, the demand for Service Tax, interest, and penalty was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal in favor of the appellant.

In conclusion, the judgment clarified the applicability of the exemption under the Notification to an individual commission agent engaged in procuring goods for clients, highlighting the importance of meeting the criteria outlined in the Notification for availing such exemptions from Service Tax.