2023 (3) TMI 236 - AT - Service Tax

Levy of Service tax and penalty - Business Auxiliary Services (BAS) - commission paid by the appellant to the foreign agents is taxable under Reverse Charge Mechanism - suppression of facts or not - rule 2(1)(d)(iv) of the Service Tax Rules, 1994 - HELD THAT - On perusal of records, it is found that in paragraph 10 11, it has been categorically held by the Commissioner that there is no suppression of facts. The proposal to impose penalty has also been dropped holding that there was no suppression of facts and that non-payment of service tax was due to bonafide belief that the amount paid to the commission agents is not subject to levy of service tax. Although the Commissioner had rendered a finding that there is no suppression of facts with intend to evade payment of tax, the demand for the extended period has been confirmed. Such confirmation of demand is not legal and proper and requires to be set aside. The appellant succeeds on the ground of limitation - thus it is not necessary to delve into the merits of the case as the issue on limitation is answered in favour of assessee. The impugned order is set aside on the ground of limitation - appeal allowed.

Issues:
1. Liability to pay service tax under Reverse Charge Mechanism (RCM) on commission paid to foreign agents.
2. Applicability of Business Auxiliary Services (BAS) in the case.
3. Grounds of limitation for demanding service tax.
4. Interpretation of the findings regarding suppression of facts and imposition of penalty.

Analysis:

Issue 1: Liability to pay service tax under RCM
The case involved the liability of the appellant to pay service tax under RCM on the commission paid to foreign agents for procuring orders. The appellant argued that since the services were provided by foreign agents and consumed outside India, they should not be subject to service tax. However, the Tribunal referred to relevant legal provisions and upheld the liability to pay service tax under RCM.

Issue 2: Applicability of BAS
The appellant contended that the services provided by foreign agents did not fall under Business Auxiliary Services (BAS) as defined in the Finance Act, 1994. They relied on a previous decision to support their argument. However, the Tribunal cited other judgments where it was held that commission paid to foreign agents for services related to the sale of goods outside India is liable to service tax under the relevant provisions.

Issue 3: Grounds of limitation
The appellant raised the issue of limitation, arguing that there was no suppression of facts and that they had a bonafide belief that the commission paid to foreign agents was not subject to service tax. The Tribunal examined the findings of the Commissioner, who had dropped the proposal to impose a penalty due to the absence of suppression of facts. Ultimately, the Tribunal ruled in favor of the appellant on the grounds of limitation, setting aside the demand for the extended period.

Issue 4: Interpretation of findings on suppression of facts
Despite the Commissioner's findings that there was no suppression of facts and the proposal to impose a penalty was dropped, the demand for the extended period was confirmed. The Tribunal deemed this confirmation as not legally justified and set it aside, ruling in favor of the appellant on the grounds of limitation. The appeal was allowed based on the limitation issue, and the impugned order was set aside.

In conclusion, the Tribunal's judgment primarily revolved around the liability to pay service tax under RCM, the applicability of BAS, the grounds of limitation for demanding service tax, and the interpretation of findings regarding suppression of facts and penalty imposition. The appellant succeeded on the limitation issue, leading to the appeal being allowed with consequential relief.

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