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2024 (4) TMI 113 - AT - Service TaxLevy of service tax - Nature of amount - Business Auxiliary Service - Technical Inspection and Certification Service - payments received from overseas buyer (M/s. Bon Prix, Germany through M/s. JPS Trading Company) after deducting certain amounts towards Bonus, Inspection charges and recycling compensation which are shown as deductions from the export price shown in the shipping bills. Department was of the view that the appellant is paying these charges which are deductions towards Bonus, Inspection charges and recycling compensation for the furtherance of their business and as such, the services received are classifiable under Business Auxiliary Service (BAS) and Technical Inspection and Certification Service (TIC) and are taxable at the appellant s end. HELD THAT - It is found that M/s. JPS Trading Company, Dubai through their Indian office viz., M/s. Fashion Force, Coimbatore is carrying out quality check of the garments being exported by the appellant to M/s. Bon Prix, Germany. M/s. JPS Trading is rendering the service of a Buying agent for M/s. Bon Prix, Germany. So, the service provider and the service receiver are located in a non-taxable territory. From the facts of the appeal, it is evident that there is neither any written or oral agreement between the appellant and M/s. JPS Trading Company, Dubai. When M/s. JPS Trading Company is a buying agent for M/s. Bon Prix, Germany, it cannot be called simultaneously as a commission agent for the appellant for promoting export of garments. In identical facts in the cases of M/S. ORIGINAL KNIT EXPORTS VERSUS COMMISSIONER OF GST AND CENTRAL EXCISE, COIMBATORE 2024 (2) TMI 84 - CESTAT CHENNAI , M/S. HARINI COLOURS VERSUS THE COMMISSIONER OF GST CENTRAL EXCISE, COIMBATORE 2024 (1) TMI 526 - CESTAT CHENNAI and M/S. VEERA CREATIONS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, COIMBATORE 2024 (1) TMI 525 - CESTAT CHENNAI , where the Service Tax demands were confirmed under BAS and TIC and where M/s. JPS Trading Company, Dubai was the buying agent and garments were exported by these appellants to M/s. Bon Prix, Germany, the Tribunal Chennai have set aside the Service Tax demands raised and also penalty imposed in favour of the exporters of the garments. The confirmation of the demand of Service Tax and the imposition of penalties cannot be sustained, and so the impugned order dated 18.08.2014 is ordered to be set aside - Appeal allowed.
Issues involved:
The issue involved in this case is whether the appellant is liable to pay Service Tax under 'Business Auxiliary Service' and 'Technical Inspection and Certification Service' or not. Comprehensive Details of the Judgment: Issue 1: Background and Service Tax Demand The appellant, M/s. K. Shethra Exports, challenged the Order-in-Appeal confirming the demand of Service Tax under Business Auxiliary Service (BAS) and Technical Inspection and Certification (TIC) Service for the period from 18.04.2006 to 30.09.2009. The appellant received payments from overseas buyers through a sourcing and quality monitoring agent, leading to the dispute over the classification of charges deducted from the export price. Issue 2: Appellant's Arguments The appellant argued that discounts cannot be equated with commission for levying Service Tax, as they are part of the sale transaction. They also contended that services received were not taxable as import of services under existing law. Additionally, they claimed a bona fide belief in not paying Service Tax on export-related services due to no services received from the agent. Issue 3: Department's Position The Department argued that the agent was promoting the appellant's export orders and conducting quality inspections, falling under the category of commission agent, thus justifying the Service Tax demand. Issue 4: Tribunal's Decision The Tribunal found that the service provider and receiver were in a non-taxable territory, with no clear agreement between the parties. Referring to similar cases, the Tribunal concluded that the demand for Service Tax was without factual or legal basis. Citing precedents, the Tribunal set aside the demand and penalties imposed, ruling in favor of the appellant. Conclusion: The Tribunal set aside the impugned order dated 18.08.2014, confirming the demand of Service Tax and penalties, in favor of the appellant, M/s. K. Shethra Exports, on 03.04.2024.
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