2018 (11) TMI 1212 - AT - Service Tax

Reverse Charge Mechanism - Import of Service - appellant procured the services of commission agents located outside India to cause sale of goods exported - Held that - The Appellants had filed Form EXP-3 before the Service Tax Authorities on 10/10/2012. The issue is no more res-integra in view of the decisions of the Tribunal in the case of PRAZ INDUSTRIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2017 (4) TMI 1286 - CESTAT, MUMBAI , where it was held that If the procedure prescribed is not fulfilled there would be no consequence of denial of the benefit of the notification. The case of appellant is that of a procedural lapse, which is condonable and denial of substantive benefit on such procedural oversight, is unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Applicability of Service Tax on commission paid to overseas agency for selling goods in the overseas market
- Compliance with conditions for availing exemptions under relevant Notifications
- Imposition of penalty under Section 76
- Procedural lapses and condonation by authorities

Analysis:
1. Applicability of Service Tax on Commission Paid to Overseas Agency:
The appellant, an exporter of silk fabrics, paid commission in foreign currency to overseas agents for selling goods in the overseas market. The issue revolved around whether the sales commission was liable to Service Tax under Reverse Charge Mechanism (RCM) under the category of "Import of Service." Various Notifications exempted Service Tax on such services used by exporters, subject to compliance with specified conditions. A show cause notice was issued alleging non-compliance, demanding Service Tax, interest, and penalty.

2. Compliance with Conditions for Availing Exemptions:
The Adjudicating Authority confirmed the demand and imposed a penalty under Section 76, which was upheld by the Commissioner (Appeals). The appellant argued that they had entered into verbal agreements with overseas agencies, and the required Form EXP-3 was filed once at the beginning of availing the commission. They submitted Form EXP-4 late due to the illness of the responsible person. The appellant contended that the procedural lapses should have been condoned.

3. Imposition of Penalty under Section 76:
The Lower Authorities and the Departmental Representative argued that the case involved not only procedural lapses but also gross negligence on the part of the appellant in complying with exemption conditions. However, the appellant's representative emphasized that the case pertained to procedural lapses, which should have been overlooked by the authorities.

4. Procedural Lapses and Condonation:
The Tribunal, after hearing both sides and examining the appeal records, referred to previous decisions where it was held that conditions in notifications were regulatory and not mandatory for availing exemptions. Denial of substantive benefit due to procedural lapses was considered unjustified, and the appeal was allowed based on the reasoning that the case involved procedural oversight, which should be condoned.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant's case was one of procedural lapse, which should not lead to the denial of substantive benefits. The judgment highlighted the importance of distinguishing between procedural irregularities and substantive non-compliance with exemption conditions, ultimately ruling in favor of the appellant.