2016 (10) TMI 796 - AT - Service Tax

Taxability - export commission - whether the appellant is required to pay service tax on the amount of export commission appearing in their trial balance on the debit side (expenditure) for the Financial Years 2006-07, 2007-08 and 2008-09 respectively? - Held that - the Adjudicating Authority have not recorded any categorical finding as to what documents he required to see, which were not produced by the appellant. He has simply alleged that the appellant could not prove to his satisfaction, which appears to be only surmises and conjectures for confirming the demand. It is not his case that he found the books of accounts to be unreliable or the certificate of the Chartered Accountant to be unreliable. Thus, brushing aside evidence produced without any cogent reason is undesirable and against the principles of natural justice. Accordingly, I hold that the appellant has sufficiently explained that the amounts appearing in their books of account, trial balance and final accounts are not expenditure made by them in foreign exchange and the whole demand has been confirmed only on presumptions and assumptions which have got no legs to stand - export commission not taxable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is required to pay service tax on the amount of export commission appearing in their trial balance for the Financial Years 2006-07, 2007-08, and 2008-09.

Analysis:

Issue 1: Service Tax Liability on Export Commission
The appellant contested the demand for service tax on export commission, arguing that the amounts in question were not payments to external parties but allocations of expenses incurred by the export section. The Chartered Accountant certified that the amounts were not paid to any external party but were merely allocations. The Adjudicating Authority in the first round of litigation observed the appellant's centralized accounting system and remanded the matter for verification of service tax payment. However, in the re-adjudication, the Authority could not conclusively establish that the payments were not related to commission paid on export. The Authority confirmed the demand and penalties, stating that the appellant failed to prove compliance with service tax statutes. The Commissioner (Appeals) rejected the appeal based on lack of evidence.

Issue 2: Judicial Review of Adjudicating Authority's Decision
The Tribunal found that the Adjudicating Authority did not specify the documents required for proof, and the demand was confirmed based on presumptions and assumptions. The Authority did not find the books of accounts or the Chartered Accountant's certificate unreliable. The Tribunal held that brushing aside evidence without cogent reasons goes against natural justice principles. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant consequential benefits as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that the demand for service tax on export commission was based on presumptions and lacked conclusive evidence. The decision highlighted the importance of natural justice principles and the need for clear findings based on evidence.