2018 (9) TMI 1596 - AT - Service Tax

Business Auxiliary services - commission paid to foreign agents for promotion and marketing of their products - Reverse charge mechanism - Held that - In similar set of facts, in the case of M/S. J.P.P. MILLS PRIVATE LTD VERSUS COMMISSIONER OF CENTRAL EXCISE (APPEALS) , SALEM 2017 (10) TMI 750 - CESTAT CHENNAI , the Tribunal has considered the issue and held that the benefit of Notification 14/2004 dated 10.9.2004 is eligible for such activities - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellants are liable to pay service tax under reverse charge mechanism on the commission paid to foreign agents for procuring orders.

Analysis:
The judgment pertains to a case where the appellants, engaged in the manufacture and export of artificial and synthetic staple fibre yarn, were availing the services of foreign agents for promotion and marketing of their products. The issue revolved around the demand for service tax under the reverse charge mechanism on the commission paid to these foreign agents. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the filing of appeals.

In the appeal, the appellant's counsel argued that the demand was based on the reverse charge mechanism for the commission paid to foreign agents, citing Notification No.14/2004-ST dated 10.9.2004, which provides an exemption for services related to taxable processing. Reference was made to previous cases such as M/s. JPP Mills Pvt. Ltd. and M/s. Arunachala Gounder Textile Mills Pvt. Ltd., where similar issues were considered.

The Assistant Commissioner (AR) supported the findings in the impugned order. After hearing both sides, the Tribunal analyzed the issue. It was noted that in a similar case involving M/s. Arunachala Gounder Textile Mills Pvt. Ltd., the Tribunal had held that the benefit of Notification 14/2004 dated 10.9.2004 applied to such activities. The Tribunal also considered the decision in the case of M/s. JPP Mills Pvt. Ltd. and concluded that the demand for service tax could not be sustained. Therefore, the impugned order was set aside, and the appeals were allowed with any consequential relief.

The judgment highlights the importance of considering relevant notifications and precedents in determining tax liabilities under the reverse charge mechanism. By referencing past cases and legal provisions, the Tribunal provided a detailed analysis leading to the setting aside of the demand for service tax in this particular scenario.