2019 (2) TMI 1110 - AT - Service Tax

Benefit of exemption - services used by the exporters for export of their goods - appellant is availing the commission agent services from the companies located outside India - N/N. 18/2009-ST dated 07.07.2009 - benefit of notification denied on the ground that they have paid commission on export of goods procured through the wholly owned subsidiaries - time limitation - Held that - The interpretation given by the adjudicating authority that the Notification benefit cannot be extended inasmuch as the export orders have been procured through wholly owned subsidiaries are erroneous. It is well-settled law that a Notification has to be read and interpreted on the basis of the words used therein and it is not permissible to ignore or introduce any word in the language of the Notification. On reading the said clause of the condition of the Notification, it is seen that there is no reference therein to the orders procured by the wholly owned subsidiaries, acting as commission agents, from a foreign land. Admittedly in the present case the appellant has not exported the goods to its own wholly owned subsidiaries or overseas joint ventures. The appellant has paid only commission to its foreign based commission agents, who happened to be their own subsidiary company and has not made any exports to them - the legislative intent beyond the introduction of the above condition is that no exporter would take undue advantage of the exemption on overseas commission agents in respect of the exports made by them to their own companies inasmuch as the export to their own companies would not require the services of any commission agents etc. - the benefit of the exemption Notification No.18/2009 is available to the appellant and the demand of Service Tax is unsustainable. Time limitation - Held that - Apart from that, appellant was also filing the returns in Form EXP-1 and EXP-2 and as such the entire facts were in the knowledge of the Revenue. Apart from that the issue involved is bona fide issue of interpretation, in which case no mala fide can be attributed to the appellant. Further, the Revenue has not produced any evidence to show that there was any suppression or mis-statement on behalf of the appellant with any mala fide intention so as to justifiably invoke the longer period of limitation - demand barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues: Interpretation of Notification No.18/2009-ST dated 07.07.2009 regarding exemption conditions for commission agent services used by exporters.

Analysis:
1. The appellant, engaged in the manufacture and export of footwear, established overseas subsidiaries to procure export orders, leading to a Service Tax dispute.
2. The dispute revolves around Notification No.18/2009-ST, specifically condition 3, which restricts exemption if exports are made by an Indian partner to overseas joint ventures or wholly owned subsidiaries.
3. The Revenue argued that since the appellant's subsidiaries were wholly owned, the exemption does not apply, resulting in a demand of Service Tax and penalties.
4. The appellant contended that the condition applies only to exports made to their own subsidiaries, not to independent foreign buyers, and challenged the interpretation of the Revenue.
5. The appellant argued against the limitation of demand, citing regular disclosures and audits during the period in question.
6. The Tribunal analyzed the phrase in condition 3, emphasizing that the exemption denial applies to exports made to the exporter's own joint ventures or wholly owned subsidiaries, not to orders procured through subsidiaries.
7. Since the appellant did not export goods to their wholly owned subsidiaries, but only paid commission, the Tribunal held the benefit of the exemption applicable, rendering the demand unsustainable.
8. Additionally, the Tribunal found merit in the appellant's argument regarding the limitation of demand, noting the absence of evidence of suppression or misstatement to justify invoking a longer period.
9. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant, granting consequential relief.

This detailed analysis provides a comprehensive understanding of the legal judgment's key issues, arguments presented, and the Tribunal's decision regarding the interpretation of the notification and the applicability of the exemption conditions for commission agent services used by exporters.