2010 (4) TMI 510 - AT - Service Tax

Reverse Charge - The issue involved in this case is regarding the Service Tax liability under the category of Business Auxiliary Service . Learned Counsel submits that the appellant is paying commission to foreign agents for procuring orders. It is her submission that prior to 18-4-2006, said commissions are not taxed in the hands of the appellant. Held that - in the light of the decision of Indian National Shipowners Association v. Union of India 2009 -TMI - 32013 - HIGH COURT OF BOMBAY, service received from non-resident of India cannot be taxed in hands of Indian recipient. Since adjudicating authority had not considered (i) assessee s plea that actual amount received was to be taxed and not billed amount and (ii) its plea of limitation, matter was to be remanded to adjudicating authority.

Summary

Issues:
1. Stay petition for waiver of pre-deposit.
2. Service Tax liability under 'Business Auxiliary Service'.
3. Taxability of commission paid to foreign agents.
4. Time limitation for issuing show-cause notice.

Analysis:
The judgment pertains to a stay petition filed for the waiver of pre-deposit of certain amounts, including demand, interest, and penalties. The Tribunal, after hearing both sides, decided to dispose of the appeal itself due to the narrow compass of the issue. The main issue revolved around the Service Tax liability under the category of 'Business Auxiliary Service'. The appellant contended that commissions paid to foreign agents were not taxable before a specific date and that the show-cause notice was issued beyond the period of limitation. The appellant also argued that the commission received was for services rendered earlier and provided evidence in the form of Bank Realization Certificates.

The Tribunal considered the submissions from both sides and referred to a Supreme Court decision regarding Service Tax liability on the recipient of services provided by Non-Residents of India. The Court held that prior to a certain date, the reverse charge mechanism applied, meaning the recipient of services from non-residents could not be taxed. However, post that date, Service Tax liability arose. The Tribunal noted the appellant's argument that only the actual amount received should be taxed, not the billed amount, and that there were no findings on this issue. Consequently, the Tribunal set aside the impugned order and remanded the matter back to the Adjudicating Authority to reconsider the actual receipt of commission amounts and the question of limitation raised by the appellant. The Adjudicating Authority was instructed to follow the principles of natural justice before reaching a conclusion. The stay petition and appeal were disposed of accordingly.