2021 (6) TMI 953 - AT - Service Tax

Valuation - Business Auxiliary Services - services received from foreign commission agents - CBEC circular no. 11/2009-ST dated 23/11/2009 - benefit of N/N. 18/2009-ST dated 07.07.2009 - HELD THAT - The appellant was engaged in receiving services of documentation and registration from a foreign entity. The said services do not make the foreign entity a Commission Agent in terms of the above definition. Therefore, the very foundation of the allegation that service provider is Commission Agent is misplaced in far as the first issue is concerned. It is seen that even Order in appeal in para 6.3 practically reiterates the findings of the Order in original. The argument that the activity undertaken by an entity abroad for the purpose of documents and registration before Foreign Regulatory Authority can be terms as activity of Commission Agent is misplaced. Consequently, demand under 4 ST/12282/2018 the heading of Business Auxiliary Services cannot be sustained and the same is set aside. The impugned notice instead of granting the benefit of exemption of service tax to the extent of 1% of the free on board value of export goods, grants the exemption to service tax on the 1% of free on board value of export goods to the Commission. It is seen that the notification is very clear. The exemption is granted to Service Tax to the extent of the 1% of the free on board value of the export goods. The same has been amply clarified by the CBEC circular no. 11/2009-ST dated 23/11/2009 in para 3. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay Service Tax under 'Business Auxiliary Services' on charges paid to foreign entities for obtaining registration with European Regulatory Authorities.
2. Correct availing of exemption from Service Tax under Notification No. 18/2009-ST for services of Foreign Commission Agents.

Analysis:

Issue 1:
The appellant, engaged in export activities, availed services from foreign entities for obtaining registration with European Regulatory Authorities. The demand for Service Tax was raised under 'Business Auxiliary Services.' The appellant argued that the show cause notice lacked specificity on the sub-heading of 'Business Auxiliary Services' under which the demand was raised. Citing precedents, the appellant contended that without specifying the exact sub-heading, the demand cannot be sustained. The Tribunal held that the foreign entities' activities did not qualify them as 'Commission Agents' under the definition. Therefore, the demand under 'Business Auxiliary Services' was set aside.

Issue 2:
Regarding the demand for Service Tax on commission paid to foreign Commission Agents, the appellant claimed exemption under Notification No. 18/2009-ST. The notification limits the exemption to 1% of the free on board value of export goods. The appellant argued that the Order in Original incorrectly calculated the benefit under the notification. The Tribunal observed that the exemption was on Service Tax to the extent of 1% of the free on board value of export goods. Citing a CBEC circular, it clarified the maximum exemption of service tax. Consequently, the demand was set aside on both issues, and the appeal was allowed.

In conclusion, the Tribunal found that the appellant was not liable to pay Service Tax under 'Business Auxiliary Services' for foreign entities' registration services. Additionally, the correct availing of exemption under Notification No. 18/2009-ST for services of Foreign Commission Agents was upheld, leading to the setting aside of the demand on both issues. The impugned order was overturned, and the appeal was allowed on 25/06/2021.