2022 (2) TMI 361 - AT - Service Tax

Levy of Service tax - Business Auxiliary Service - commission amount to the tune ranging from 11% to 12% paid to commission agent located outside the India - case of the department is that said commission shown in the shipping bills/ export invoices is nothing but commission paid to the commission agent towards export of goods, therefore said commission amount is chargeable to service tax under the head Business Auxiliary Service - HELD THAT - Firstly, there is no commission agent exist who provided the service for export trading of the goods exported by the appellant. When no service provider is in existence it cannot be said that the appellant have received the commission agent service. Secondly, it is also fact that the appellant have not paid the commission to any person in the foreign country. Therefore, in absence of any consideration paid for the alleged commission agent services no service tax can be demanded. In the export invoice the appellant have deducted an amount in the nomenclature of commission from the gross sale price thus, the deduction was passed on to the buyer of export goods which is nothing but a discount given to the Foreign Buyers of the goods - neither any service provider exist nor was any consideration paid to any service provider. Therefore, the department s contention is baseless and not sustainable. From various judgments it can be seen that on the identical issue this tribunal has taken a consistent view that merely because in invoice commission is mentioned that alone is not sufficient to treat it as a commission but the same should be treated as discount only. Consequently no service exist hence no service tax can be demanded - reliance can be placed in the case of LAXMI EXPORTS AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE ST, SURAT 2020 (9) TMI 838 - CESTAT AHMEDABAD . The appellant is not liable to service tax on the so called commission mentioned in the invoice of the export - appeal allowed - decided in favor of appellant.

Issues Involved
1. Liability of the appellant to pay service tax on commission shown in export invoices.
2. Consideration of the commission as a discount or as a payment to a foreign commission agent.
3. Applicability of Section 66A of the Finance Act, 1994, and related rules.
4. Eligibility for refund and exemption under specific notifications.

Detailed Analysis

1. Liability of the appellant to pay service tax on commission shown in export invoices:

The primary issue revolves around whether the appellant, a merchant exporter, is liable to pay service tax on the commission amounts shown as deductions in their export invoices. The department argued that these commissions are payments to foreign commission agents and thus taxable under "Business Auxiliary Service" as per Section 65(19) and Section 66A of the Finance Act, 1994, under the Reverse Charge Mechanism. The adjudicating authority confirmed the demand along with penalties and interest, leading the appellant to file the present appeal.

2. Consideration of the commission as a discount or as a payment to a foreign commission agent:

The appellant contended that the commission shown in the invoices was merely a reflection of a discount given to foreign buyers and not a payment to any commission agent. They argued that there was no foreign agent involved, and no service was received from any such agent. The tribunal examined the records and found that no commission agent existed who provided services for the export of goods. The deduction shown in the export invoices was deemed a discount passed on to the buyers, not a commission paid to any agent. This interpretation aligns with several precedents, including Laxmi Exports and Duflon Industries Pvt. Ltd., where similar deductions were treated as trade discounts rather than commissions.

3. Applicability of Section 66A of the Finance Act, 1994, and related rules:

The appellant argued that neither Section 66A of the Finance Act, 1994, nor Rule 2(d)(iv) of the Service Tax Rules, 1994, nor Rule 3 of the Taxation of Services (Provided from outside India and Received in India) Rules, 2006, applied because no foreign agent was appointed or dealt with by the appellant. The tribunal agreed, stating that in the absence of a service provider and consideration paid for alleged commission agent services, no service tax could be demanded. The deductions in the invoices were confirmed as trade discounts, not commissions, thus negating the applicability of the aforementioned sections and rules.

4. Eligibility for refund and exemption under specific notifications:

The appellant also argued that even if they were liable to pay service tax under Section 66A, they would be eligible for refund and exemption under Notification No. 41/2007-S.T. dated 06.10.2007, Notification No. 17/2009 -ST dated 07.07.2009, and Notification No. 18/2009 S.T. dated 07.07.2009. However, the tribunal did not find it necessary to delve into this argument, as the primary issue was resolved in favor of the appellant by determining that the deductions were trade discounts and not commissions.

Conclusion:

The tribunal concluded that the appellant was not liable to pay service tax on the so-called commission mentioned in the export invoices. The deductions were trade discounts given to foreign buyers, and no service provider or consideration for commission agent services existed. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief. The tribunal's decision was consistent with previous judgments on similar issues, further reinforcing the interpretation that such deductions are not subject to service tax.

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