2018 (7) TMI 1214 - AT - Service Tax

Business Auxiliary Services - Commission received from the foreign parties - export of services or not? - Held that - The issue is decided by the Tribunal in favor of the assessee/appellant in the case of Sumitomo Corporation of India Pvt. Ltd. 2017 (3) TMI 1366 - CESTAT NEW DELHI , where it was held that the services have been provided to foreign entities as per the agreement entered into and the beneficiary is such foreign entities. The amount as consideration for such services was also paid by the said foreign entities in convertible foreign exchange. Therefore, the services rendered by the appellants are squarely covered by the Export of Service Rules and there is no service tax liability on them. Demand do not sustain - appeal allowed - decided in favor of appellant-assessee.

Issues:
1. Confirmation of demand of Service Tax under section 73(1) of the Finance Act, 1994.
2. Classification of services provided by the appellant under Business Auxiliary Service.
3. Failure of the appellant to perform duties as per agreement.
4. Alleged suppression of facts by the appellant regarding acting as a commission agent for foreign parties without proper service tax registration.
5. Quantification of amount to be reversed from Cenvat credit in terms of Rule 6(3A) of Cenvat Credit Rules.

Issue 1 - Confirmation of Service Tax Demand:
The appellant filed an appeal against the Order-in-Original confirming the demand of Service Tax amounting to ?2,02,66,241 under section 73(1) of the Finance Act, 1994. The department conducted an audit of the appellant's business and found commission received from foreign parties. The appellant explained the transactions but was issued a show cause notice alleging various violations. The impugned order confirmed the demand, interest, and penalties. However, the Tribunal, citing precedents, found the recipient of services to be foreign entities, thereby qualifying as export of service. The Tribunal held in favor of the appellant, stating that the service tax liability was not applicable under Business Auxiliary Service.

Issue 2 - Classification of Services under Business Auxiliary Service:
The appellant's services were alleged to fall under Business Auxiliary Service, not qualifying as export of service. However, the Tribunal, referencing previous cases, determined that the appellant's activities amounted to promoting the market for foreign entities in India, thus constituting export of service. The Tribunal found no merit in the impugned order confirming the demand under Business Auxiliary Service.

Issue 3 - Failure to Perform Duties and Suppression of Facts:
The appellant was alleged to have failed to perform duties as per the agreement and suppressed facts by acting as a commission agent for foreign parties without proper service tax registration. The Tribunal did not address these specific allegations in its judgment, focusing primarily on the classification of services and quantification of Cenvat credit reversal.

Issue 4 - Quantification of Cenvat Credit Reversal:
The impugned order quantified the amount to be reversed from Cenvat credit under Rule 6(3A) of Cenvat Credit Rules. The Tribunal examined the methodology adopted by the Original Authority and found it fair and justified, despite not being part of the provisions during the material time. The Tribunal rejected the Revenue's contentions regarding the reversal of credit based on the proportion between traded goods and service income, stating there was no legal backing for such assertions. The appeal filed by the Revenue on this issue was found to have no merit.

In conclusion, the Tribunal allowed the appeal filed by the appellant/assessee, citing settled legal positions and precedents to support its decision.

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