2010 (2) TMI 451 - AT - Service Tax

Reverse Charges - the respondents were liable to pay service tax on the commission paid to its agents based abroad who canvassed export orders for the fabrics and garments manufactured by it during the period 15-3-2005 to 9-7-2005. Commissioner (Appeals) passed the order in favour of assessee. Held that - in the light of the decision of National Shipowners Association v. Union of India 2009 -TMI - 32013 - HIGH COURT OF BOMBAY, appeal of revenue against order was to be rejected.

Summary

Issues:
- Liability to pay service tax on commission paid to agents based abroad for canvassing export orders.
- Interpretation of rule 2(1)(d)(iv) of Service Tax Rules, 1994.
- Applicability of section 66A of the Finance Act, 1994.
- Impact of judicial decisions on liability of the recipient of services from abroad.

Analysis:
1. The appeal was filed by the revenue challenging the liability of the respondents to pay service tax on commissions paid to agents abroad for securing export orders. The impugned order held that no service tax was payable based on rule 2(1)(d)(iv) of the Service Tax Rules, 1994, before the introduction of section 66A in the Finance Act, 1994 on 18-4-2006. The Commissioner (Appeals) relied on various Tribunal decisions supporting this view.

2. The counsel for the respondents cited the judgment of the Hon'ble High Court of Bombay in Indian National Shipowners Association v. Union of India, which was subsequently upheld by the Hon'ble Supreme Court. These judgments favored the assessee's position, indicating that the dispute had already been settled in favor of the respondents.

3. The Senior Departmental Representative (SDR) argued that the original authority's order was in line with the provisions of rule 2(1)(d)(iv) of the Service Tax Rules prevailing at that time. The SDR contended that the impugned order should be set aside, suggesting a different interpretation of the law.

4. After considering the arguments presented, the Tribunal noted the decisions of the Hon'ble High Court of Bombay and the Hon'ble Supreme Court, which supported the respondents' position. Consequently, the Tribunal found no merit in the revenue's appeal and rejected it, upholding the view that the respondents were not liable to pay service tax on the commissions paid to their agents abroad for canvassing export orders.