2020 (12) TMI 754 - AT - Service Tax

Business auxiliary service - commission received by the appellant for the services rendered to foreign companies - period involved is 2007-08 to 2010-11 - HELD THAT - The commission amount was received by the appellant from foreign principals in convertible foreign exchange for which debit notes and the corresponding certificates of foreign inward remittance issued by the banks were submitted by the appellant before the Adjudicating Authority. The debit note for commission and the corresponding FIRC have been enclosed from pages 108 to 144 of the paper-book. It is, therefore, apparent that the appellant had received commission in convertible foreign exchange for the service rendered outside India to foreign companies. The appellant promoted the business of such foreign companies in India and as a consideration for this service, the appellant received commission from the foreign companies in convertible foreign exchange. The appellant has also described the manner in which it had promoted the business of such foreign companies from which it is clear that the appellant supports such foreign companies to procure orders in India. Such service is provided from India and used outside India. The service rendered by the appellant would, therefore, satisfy the twin conditions set out in rule 3(2) of the 2005 Rules as has also been clarified by the Circular dated February 24, 2009. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Confirmation of demand of service tax on commission received by the appellant under "business auxiliary service" (BAS).
2. Classification and qualification of services as "export of services."
3. Sufficiency of evidence provided by the appellant to establish the export of services.
4. Invocation of the extended period of limitation and imposition of penalties.

Issue-wise Detailed Analysis:

1. Confirmation of Demand of Service Tax on Commission Received under BAS:
The appeal challenges the order dated May 5, 2016, where the Commissioner (Appeals) upheld the Additional Commissioner's decision confirming the demand of service tax on the commission received by the appellant for services rendered to foreign companies under BAS for the period 2007-08 to 2010-11. The show cause notice was issued on September 27, 2012.

2. Classification and Qualification of Services as "Export of Services":
The appellant, a manufacturer of food processing machines, also acted as a commission agent for foreign companies, procuring orders and receiving sales commission in convertible foreign exchange. The appellant classified these services under BAS and considered them as "export of services," thus not paying service tax. The relevant rules and circulars, including Rule 3(2) of the Export of Services Rules, 2005, and CBEC Circulars dated February 24, 2009, and May 13, 2011, were discussed to determine the conditions for a service to qualify as an export. The rules before and after February 27, 2010, were examined, emphasizing that the service must be provided from India and used outside India, with payment received in convertible foreign exchange.

3. Sufficiency of Evidence Provided by the Appellant:
The appellant submitted debit notes and Foreign Inward Remittance Certificates (FIRC) as evidence of receiving commission in convertible foreign exchange. The Commissioner (Appeals) dismissed these submissions, stating the absence of corroborative documents like agreements and invoices. However, the Tribunal found that the appellant had sufficiently demonstrated the provision of services to foreign companies and receipt of payment in convertible foreign exchange, fulfilling the conditions of export of services. The Tribunal referenced the case of GAP International Sourcing (India) Pvt. Ltd. vs. Commissioner of Service Tax, where similar services were deemed as exported out of India.

4. Invocation of Extended Period of Limitation and Imposition of Penalties:
The appellant argued against the invocation of the extended period of limitation and imposition of penalties, citing the absence of willful suppression of facts. The Tribunal did not specifically address this issue in the final judgment but implicitly supported the appellant's position by setting aside the demand and penalties.

Conclusion:
The Tribunal concluded that the services provided by the appellant qualified as export of services under the Export of Services Rules, 2005, and thus were not liable for service tax. The order dated May 5, 2016, by the Commissioner (Appeals) was set aside, and the appeal was allowed.