2019 (5) TMI 1021 - AT - Service Tax

Non-payment of service tax - amount paid to foreign commission agents - reverse charge mechanism - HELD THAT - Appellants has not been able to bring any documentary evidence on record to show that such outward remittances were on account of the claim made by the foreign buyers on account of substandard quality - On being questioned as to whether there is any correspondence between the buyer and the seller and any claim made by the foreign customers, learned Chartered Accountant fairly agrees that there is no such documentary evidence either in the shape of papers or in the shape of electronic evidence. Appeal dismissed - decided against appellant.

Summary

Issues:
Demand of service tax on outward remittances to foreign commission agents; Lack of evidence to support the claim of payments being for substandard quality of exported products.

Analysis:
The judgment pertains to two appeals with identical issues arising from separate orders of the Commissioner (Appeals). The appellants were facing a demand for service tax on payments made to foreign commission agents without discharging the tax on reverse charge basis. The appellants argued that the remittances were not for commission but as damages for substandard quality of exported products. However, the Commissioner (Appeals) noted that the appellants themselves referred to the payments as agent's commission and failed to provide any evidence supporting their claim of payments being for substandard quality.

The learned Chartered Accountant representing the appellants could not produce any documentary evidence to substantiate that the outward remittances were indeed for the alleged substandard quality. When questioned about any correspondence or claims made by foreign buyers regarding the quality issue, the Chartered Accountant admitted the lack of such evidence, whether in physical or electronic form. Consequently, the Tribunal found no flaws in the lower authority's decision and rejected both appeals.

In conclusion, the Tribunal upheld the demand for service tax on outward remittances to foreign commission agents due to the appellants' failure to provide sufficient evidence supporting their contention that the payments were made as damages for substandard quality of exported products. The absence of documented proof or correspondence between the parties regarding the quality issue led to the rejection of the appeals.