2018 (4) TMI 1096 - AT - Service Tax

Penalty u/s 78 - intent to evade not present - revenue neutral situation - Foreign Agent Commission Services received in India - Held that - Apart from the fact that the entire situation was revenue neutral, we find lack of evidence to reflect upon the appellant's malafides - penalty set aside. Demand of service tax with penalty - commission received from foreign principals, for promoting their products in India - Held that - Tribunal's decision in the case of M/s. Gap International Sourcing (India) Pvt. Ltd. Vs Commissioner of Service Tax, Delhi 2014 (3) TMI 696 - CESTAT NEW DELHI lays down that the said activity would get covered under the Export of Services Rules - demand with penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demand of service tax on reverse charge basis for Foreign Agent Commission Services.
2. Imposition of penalty under section 78 for the above demand.
3. Confirmation of demand for commission received from foreign principals for promoting their products in India.
4. Imposition of penalty under section 78 for the above demand.

Issue 1: Confirmation of demand of service tax on reverse charge basis for Foreign Agent Commission Services:

The dispute in the present appeal pertains to the confirmation of a demand of service tax amounting to ?3,11,959 against the appellants on a reverse charge basis for Foreign Agent Commission Services received in India between a specific period. The appellant does not dispute the demand but challenges the imposition of an equal penalty under section 78. The appellant argues that the introduction of section 66A was unclear about the responsibility to pay service tax on a reverse charge basis, leading to a revenue-neutral situation. The tribunal agrees with the appellant's contentions, noting the lack of evidence of malafides on the appellant's part. Consequently, while confirming the demand, the tribunal sets aside the penalty imposed under section 78.

Issue 2: Imposition of penalty under section 78 for the demand related to Foreign Agent Commission Services:

The tribunal, after considering the revenue-neutral nature of the situation and the absence of evidence indicating malafides on the part of the appellant, decides to set aside the penalty imposed under section 78 for the demand related to Foreign Agent Commission Services. The tribunal's decision is based on the appellant's argument that the issue surrounding the responsibility to pay service tax on a reverse charge basis was unclear due to the introduction of section 66A.

Issue 3: Confirmation of demand for commission received from foreign principals for promoting their products in India:

A demand of approximately ?25.71 lakhs is confirmed against the assessee for the commission received from foreign principals for promoting their products in India. Additionally, penalties under section 78 were imposed in this regard. The tribunal notes that the issue has been settled by various decisions, including a reference to the tribunal's decision in a specific case, which established that the activity falls under the Export of Services Rules. Following this precedent, the tribunal sets aside the confirmation of demand and the penalty imposed on the said amount, disposing of the appeal accordingly.

Issue 4: Imposition of penalty under section 78 for the demand related to commission received from foreign principals:

In the case of the demand related to the commission received from foreign principals for promoting their products in India, the tribunal sets aside the penalty imposed under section 78. The tribunal's decision is based on the established legal position that the said activity falls under the Export of Services Rules, as determined by previous tribunal decisions. By following this legal precedent, the tribunal concludes that the demand confirmation and penalty imposition on the said amount are not justified, disposing of the appeal accordingly.