2017 (10) TMI 750 - AT - Service Tax

Business Auxiliary Service - commission paid to foreign agents - reverse charge mechanism - Held that - The period involved is 9.7.2004 to 31.12.2006. The provision for payment of service tax under reverse charge mechanism was brought into the Finance Act by introducing Section 66A with effect from 18.4.2006 - The decision in the case of Indian National Ship Owners Association Vs UOI 2008 (12) TMI 41 - BOMBAY HIGH COURT wherein it was held that the section would be operative with effect from 18.4.2006 only - the demand prior to 18.4.2006 is unsustainable. Demand beyond 18.4.2006 - Held that - the appellants are manufacturers of artificial and synthetic staple fibre yarn - reliance placed in the case of CCE (A) Trichy Versus Arvind A Traders, Anartex Exports & others 2015 (11) TMI 1176 - CESTAT CHENNAI - the demand beyond 18.4.2006 is also not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Demand of service tax under 'Business Auxiliary Service' on commission paid to foreign agents.

Analysis:
The judgment by the Appellate Tribunal CESTAT Chennai dealt with the issue of the demand of service tax under 'Business Auxiliary Service' on the commission paid to foreign agents. The appellant, a manufacturer and exporter of textile and textile articles, was subjected to a demand for service tax on the commission paid to overseas commission agents for the period from 09.07.2004 to 31.12.2006. The appellant contended that the demand and penalties were not sustainable due to various reasons.

The appellant argued that they were entitled to an exemption under Notification No.14/2004-ST dated 10.9.2004, as established in previous tribunal cases. Additionally, the appellant claimed that the demand for the period up to 18.04.2006 was not valid because the Revenue lacked jurisdiction to levy service tax on import of services until Section 66A was enacted. The appellant supported this argument by citing relevant legal precedents.

The Appellate Tribunal considered the arguments presented by both sides. It noted that the provision for payment of service tax under reverse charge mechanism was introduced with effect from 18.4.2006 through Section 66A. Referring to a previous case, the Tribunal affirmed that the demand before 18.4.2006 was unsustainable. Furthermore, the Tribunal acknowledged the appellant's reliance on Notification No.14/2004-ST and previous tribunal judgments related to textile processing services, ultimately ruling in favor of the appellant.

Consequently, the impugned order demanding service tax on the commission paid to foreign agents was set aside. The appeal was allowed, providing the appellant with consequential reliefs, if any. The Tribunal's decision highlighted the exemption under Notification No.14/2004-ST and the jurisdictional limitations on levying service tax before the enactment of Section 66A, leading to the favorable outcome for the appellant.