2024 (2) TMI 84 - AT - Service Tax

Levy of Service Tax - Business Auxiliary Service - Technical Inspection and Certification Service - failure to discharge the Service Tax liability - Service Tax registration not taken - non-filing of Service Tax returns - HELD THAT - It is brought out from evidence that garments are sold by the appellant to M/s. Bon Prix, Germany. M/s. JPS Trading, Dubai has played a role of middleman in conducting quality check through M/s. Fashion Force in India. According to the department, it is an agent of M/s. JPS Trading, Dubai. However, there is no payment made by the appellant to M/s. Fashion Force. It is not understood how there would be a service rendered by M/s. JPS Trading Company to the appellant so as to be taxable under reverse charge mechanism. Even if there was any service rendered in regard to quality checking, the demand ought to have been raised against M/s. Fashion Force, who is the service provider for quality checking. If the department is of the view that Fashion Force, Tirupur is the branch office of JPS Trading, Dubai then it would be M/s. Fashion Force, Tirupur who is liable to collect and pay service tax. It cannot be said that the deductions made in the invoices raised in the name of M/s. Bon Prix, Germany is a payment made to Fashion Force, Tirupur. For these reasons, we find that the demand raised under BAS , Technical Inspection and Certification Service is without any factual or legal basis. M/s. JPS Trading, Dubai through their agent or their own office in the name of M/s. Fashion Force is carrying out quality check of the garments being exported. M/s. JPS Trading is rendering the service of a buying agent for M/s. Bon Prix, Germany. The service provider and service receiver are thus located in a non--taxable territory. There is neither any written or oral agreement between the Appellant and M/s. JPS Trading, Dubai. When M/s. JPS Trading, Dubai is a buying agent, he cannot be termed as a commission agent for the Appellant promoting export of garments. Reference made to the decision in the case of AQUAMARINE EXPORTS VERSUS C.C.E. S.T. -SURAT-I 2022 (2) TMI 361 - CESTAT AHMEDABAD wherein it was held that 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. Involving different exporters where M/s. JPS Trading, Dubai have procured the goods for M/s. Bon Prix, Germany in the cases of M/S. VEERA CREATIONS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, COIMBATORE 2024 (1) TMI 525 - CESTAT CHENNAI and M/S. HARINI COLOURS VERSUS THE COMMISSIONER OF GST CENTRAL EXCISE, COIMBATORE 2024 (1) TMI 526 - CESTAT CHENNAI , this Tribunal has already set aside the demands and penalties imposed involving identical facts. The impugned order is set aside - appeal allowed.

Summary

Issues:
The judgment involves determining whether the Appellant is liable to pay Service Tax under "Business Auxiliary Service" & "Technical Inspection and Certification" or not.

Comprehensive Details:

Issue 1: Service Tax Liability on Expenditure
The Appellant, engaged in the manufacture and export of hosiery garments, challenged the demand of Service Tax on expenditure towards bonus, recycling compensation, and inspection charges incurred at the buyers' end. The Appellant contended that the deductions in the invoices to the overseas buyer were discounts in the sale transaction, not payments for services received. The Department alleged non-payment of Service Tax, leading to a Show Cause Notice and subsequent penalties. The Appellant argued that no services were received, and the demand was not legally justified.

Issue 2: Service Provider Identification
The Appellant emphasized that the Show Cause Notice lacked clarity on the service provider and recipient, questioning the basis for the demand. The Department claimed that M/s. JPS Trading, Dubai, through its local office, provided services for business promotion and quality checks, justifying the levy of Service Tax. However, the Appellant maintained that no payments were made to M/s. JPS Trading or their local office in India, challenging the validity of the demand under reverse charge mechanism.

Issue 3: Legal Basis for Demand
The Tribunal analyzed the role of M/s. JPS Trading as a buying agent and the nature of the deductions in the export invoices. It was established that the services provided were incidental to the buying agent role, and the deductions were part of the sale transaction with the overseas buyer. The Tribunal found the demand under "Business Auxiliary Service" & "Technical Inspection and Certification" to be unfounded, as the service provider and receiver were in a non-taxable territory, with no formal agreement between the parties.

Precedent and Decision
Referring to past cases, the Tribunal highlighted the absence of a commission agent and lack of consideration for alleged services, leading to the conclusion that the demand was baseless. The Tribunal cited similar cases where demands were set aside, reinforcing the decision to allow the appeal and provide consequential relief as per the law.

The judgment ultimately favored the Appellant, setting aside the demand for Service Tax under "Business Auxiliary Service" & "Technical Inspection and Certification" based on the lack of factual and legal basis for the Department's claims.