2018 (9) TMI 1587 - AT - Service Tax

Levy of service tax on commission retained - case of appellant is that retaining the commission for the service rendered to foreign insurance companies has to be treated as amount received in convertible foreign exchange and, therefore, are export of services - whether the appellants are liable to pay service tax on the commission retained by them in Indian currency? Held that - In the appellant s own case SUPRASESH GENERAL INSURANCE SERVICES & BROKERS PVT. LTD. VERSUS THE COMMISSIONER OF SERVICE TAX, CUSTOM, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL 2015 (9) TMI 1219 - MADRAS HIGH COURT , the very same issue was considered and the jurisdictional High Court has held the same in favour of the assessee. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on commission retained in Indian currency.

Detailed Analysis:
The appellants, engaged in providing Insurance Auxiliary Service through insurance agents, were retaining commission while remitting premiums to foreign insurance companies. The Department contended that the commission retained in Indian currency was not exempt from service tax as it was not received in convertible foreign exchange. A Show Cause Notice was issued, leading to a demand of ?1,07,73,577/- along with interest and penalties imposed by the Commissioner. The appellants challenged this before the Tribunal.

During the hearing, the Managing Director of the appellant argued that they had been discharging service tax on commissions retained for re-insurance contracts with Indian re-insurers but claimed exemption for contracts with foreign re-insurers under Export of Service Rules, 2005. He cited the Supreme Court decision in M/s. J. B. Boda and Co. (Pvt.) Ltd. and a CBDT Circular to support their position. Additionally, the appellant highlighted a favorable judgment from the jurisdictional High Court in a previous case.

The Ld. AR supported the findings of the impugned order, but the Tribunal, considering the previous judgment in the appellant's favor by the jurisdictional High Court, held that the appellants were not liable to pay service tax on the commission retained in Indian currency. Consequently, the demand was set aside, and the appeal was allowed with any consequential reliefs.

In conclusion, the Tribunal ruled in favor of the appellants, stating that they were not obligated to pay service tax on the commission retained by them in Indian currency, based on the precedent set by the jurisdictional High Court in a previous case.