2019 (3) TMI 45 - AT - Service Tax

Business Auxiliary services or not - Non-payment of service tax - service tax on the commission paid by them to a commission agent situated abroad - reverse charge mechanism - It is the case of the revenue in the audit that the appellant having paid an amount to a person situated abroad, under reverse charge mechanism is liable to pay service tax - benefit of N/N. 13/2003-ST - whether the activity of threshing and drying undertaken by the appellant of raw tobacco procured and purchased will amount to an activity falling under category of Business Auxiliary Service or otherwise? Held that - This very issue has been decided by this bench in the case of ML Agro Products Ltd 2017 (2) TMI 1355 - CESTAT HYDERABAD , where it was held that threshing and drying of the tobacco leaves will not amount to any service falling under the category of Business Auxiliary Services - thus, the activity undertaken by the appellant herein of threshing and drying of raw tobacco leaves would not come under category of Business Auxiliary Service and is not a taxable activity - demand set aside. Taxability - commission paid to foreign commission agent, under reverse charge mechanism - Held that - The bench in the case of Kohinoor Foods Ltd 2017 (3) TMI 1289 - CESTAT NEW DELHI specifically held that the transaction would fall under the purview of notification 13/2003-ST and eligible for exemption and hence no tax is payable - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of service tax on activities of a goods transport agency and renting of immovable property services.
2. Tax liability on commission paid to a foreign commission agent under reverse charge mechanism.

Analysis:

Issue 1:
The case involved appeals against Orders-in-Appeal related to service tax liability on activities categorized as 'goods transport agency services' and 'renting of immovable property services.' The audit revealed that the appellants had not discharged tax or amended their registration certificate to include 'Business Auxiliary services.' The revenue contended that the appellants were liable to pay service tax on the commission paid to a foreign agent. The adjudicating authority upheld the demands, interest, and penalties. The first appellate authority also rejected the appeal. The senior counsel cited precedents to argue that the activity of threshing and drying tobacco leaves did not fall under 'Business Auxiliary Services.' The Tribunal held that such activities were not taxable under this category, citing previous judgments upheld by the Apex Court. The impugned orders were set aside, and the appeals were allowed.

Issue 2:
Regarding the taxability of the commission paid to a foreign commission agent under reverse charge mechanism, the departmental representative argued that the processing of tobacco leaves by the appellants made them taxable goods, and any commission paid was subject to tax. However, referencing previous cases, the Tribunal concluded that the commission paid to a foreign agent fell under an exemption notification and was not taxable. Citing specific judgments, the Tribunal held that the transaction was covered under the exemption, and no tax was payable. Consequently, the impugned orders were deemed unsustainable and set aside, leading to the allowance of the appeals.